Logbook loans refer to a form of credit, which requires borrowers to offer their vehicles to the lender against which they can secure the loan. The lender owns it until you repay the loan though you do get to use your vehicle during this period. The internet remains a virtual treasure trove of information as far as these loans are concerned. As a borrower, you should always consider acquainting yourself with the nuances of these loans so as to make an informed decision.
How do logbook loans work?
This is the first thing that you should find out about these loans in order to judge their suitability. Borrowers can usually get anything between £500 and £50,000, depending on the worth of the vehicle against which credit is secured. This form of financing is known as the logbook loan because you need to submit the “logbook” or registration document of your vehicle to your lender when you are looking forward to secure this loan.
The documents act as a proof of the fact that you are the registered owner of the vehicle.
The secured form of lending entails high APR (which mostly crosses 400%). If you are living in England or Wales, you will be required to sign a credit agreement and a “bill of sale”, which implies that the lender is now the owner of your vehicle but you are still entitled to use it provided you are successfully fulfilling the repayment requirements. However, the law in England and Wales only recognises the bill of sale when the lender is sagacious enough to register the same with the High Court. In case, this particular document is not registered, the lender must secure a court’s approval to repossess the vehicle against which the logbook loan is offered.
The borrowing requirement, however, changes if you are living in Scotland. In this country, the bill of sale is not really backed by legal sanction – meaning it is not really regarded as a document which is legally binding. There are separate credit arrangements for lenders and borrowers of logbook loans in Scotland. As a borrower you should be duly aware of the fact that consumer rights under the Consumer Credit Act 1974 will prevail if you are entering a “conditional sale” agreement or a hire-purchase agreement.
What is the total cost of these loans?
The logbook loans generally carry high APR (more than 400%) as has already been mentioned above. You will be charged interest rate per week. There are a few companies that pay the loan by cheque while there are others that offer instant credit. However, you need to be prepared to pay fees up to 4% of the loan for the same.
Please remember that you can even lose your vehicle if you fail to repay your loan. The vehicle will not be accepted unless you are able to furnish proof establishing you as the owner of the same. Do compare the rates of interest charged by several lenders before accessing the services of one of them.