Logbook Loans: All You Need to Know

When you’re struggling to find a personal loan for a financial emergency because your credit score keeps on getting in the way, there are alternatives you can check out. One of the most popular bad credit loans available in the UK today is logbook loans. Providers of this loan product wouldn’t mind if you have a poor credit rating. If you own a vehicle you are willing to use as collateral then getting a logbook loan might just be the financial solution you are looking for.

To help you understand how the financial product works, here is a quick guide that will tell you all you need to know.

What is a logbook loan?

A logbook loan is a type of secured personal loan where the borrower must own a vehicle that will serve as collateral for the loan. The loan, in other words, will be secured against the vehicle putting said asset at risk of repossession. If the borrower at some point cannot repay the loan anymore, the provider can repossess the vehicle and even resell it if necessary

Who can apply for a logbook loan?

If you are a vehicle owner and you are of legal age and a UK resident then you are eligible to apply for a logbook loan. The financial product is specifically offered for borrowers with bad credit. It caters to people who cannot avail a personal loan elsewhere.

To apply, borrowers are required to provider the following documents:

  • V5 or logbook document
  • MOT certificate
  • Car insurance details
  • Proof of identification (2 IDs with photo)
  • Proof of billing address (recent utility bill)
  • Proof of income (recent pay slips)

How much can you borrow with a logbook loan?

With a security involved, borrowers are able to borrow more than if you just settle for an unsecured personal loan. With logbook loan, you can borrow as much as 50% or sometimes up to 70% of your vehicle’s official trade value. In general, providers offer loans from £500 up to £25,000 at repayment terms from 12 months up to 3 years. Repayments can be made bi-weekly or monthly.

How much does a logbook loan cost?

While logbook loans are ideal for people with bad credit because of the fast approval and minimal requirements, the loan product is not without its downside. One such downside is its cost. Logbook loans come with a whopping 400% representative APR on average. This cost is inclusive of interest rate, admin fees, hidden fees and other related charges. In comparison with other personal loans for people with bad credit, it’s pretty obvious that logbook loans take the spot for one of the most costly loans there is. Click here for a better understanding of how APR affects your loan’s cost.

Should you apply for a logbook loan?

Logbook loans can be pretty costly, which is why it’s not always recommended for borrowers. In fact, many experts will probably tell you to stay away from it. But then again, there’s no denying the fact that logbook loans come handy for financial emergencies.

If you decide to apply for a logbook loan, just remember that there are risks involved. In order to get around the risks and make the loan work for you, make sure you perfectly understand what you’re getting into. But more importantly, make sure you can afford the monthly repayments so you wouldn’t face any costly financial consequences along the way.