For new borrowers, the realm of loans may seem intimidating. Among all the options, logbook loans are one of the most distinct because of how they are structured and what is required.
A logbook loan is a secured loan in which your car is used as security. That is, while your car is still owned by and in your control and use, the lender retains title papers until the debt is paid off.
These loans are often attractive, particularly to those with minimal credit history or who require immediate access to cash.
They do carry inherent risks and factors that the borrower should understand. Before taking the plunge, a grasp of the advantages and dangers of logbook loans is imperative.
This guide will lead you through everything you can learn about logbook loans.
What Are Logbook Loans?
Logbook lending is a secured lending product that utilizes your car as collateral. It operates in the UK through the issue of a bill of sale with your car transferred to the lender, though you can keep using the vehicle.
The lender keeps the vehicle’s logbook (V5C certificate of registration) in its possession until the loan is paid off.
Log book loans are usually short-term loans processed rapidly, so these are preferable to those who urgently require money.
But if repayments are not made, the lender may repossess the car without a court order.
It is important to note that while you may continue to operate your vehicle during the life of the loan, it is not yours legally until the debt is paid off.
The Process of Getting a Logbook Loan
1. Apply and Enter Vehicle Details
To begin, you complete an application with a lender. This is done by providing basic personal information and details about your car, including the model, make, age, and state.
They may also inquire about your income and employment status to determine your repayment ability.
2. The Lender Determines Your Car’s Worth
The lender will assess the market value of your vehicle once your application has been received.
They will use this value to decide how much they are willing to advance you.
3. You Sign a Bill of Sale Agreement
If you take the loan offer, you will sign two significant documents:
A credit contract that specifies how much is being borrowed, the payment calendar, and the interest rate.
A bill of sale, under which temporary legal vehicle ownership is passed to the lender while the car is financed.
4. Get your Loan Funds
The funds will generally be credited to your bank account within 24 hours after signing the documents. This rapid payout is one of the reasons those individuals use logbook loans, particularly during emergency cash needs.
Photo from Freepik.com
5. Start Making Monthly Repayments
You will then start making periodic repayments according to the agreed-upon schedule. If you make all your payments on time, your car will belong to you outright after the term ends.
But if you are behind, the lender may repossess your vehicle, without the need to first obtain a court order, because of the bill of sale.
Here are the Benefits of a Logbook Loan
1. Quick Access to Funds
One of the greatest benefits of logbook loans is the quick process. Getting the cash from the application usually takes only a day or so.
This acceleration makes logbook loans particularly suited to short-term financial requirements, such as medical expenses, car repair bills, or settling debts due by specific deadlines.
In contrast to standard bank loans that may take several weeks to process, these loans are intended for a speedy turnaround.
2. No or Minimal Credit Checks
Because the car is collateral against the loan, most lenders don’t put much emphasis on your credit history when making the decision.
They may skip credit checks altogether or do only a soft check. This is particularly helpful to those with low credit scores or poor or minimal credit history who are frequently rejected from taking personal loans.
3. Continuous Use of Your Car
Although the lender will own your vehicle temporarily with the bill of sale agreement, you can keep driving and utilizing it during the life of the loan, provided that regular payments are made.
This is especially helpful to those dependent on their vehicle for work, domestic duties, or regular errands.
4. Less Bureaucracy and Hassle
Unlike some other bank loans or loans that call for bank statements, guarantors, or extensive financial histories, logbook loans usually require less complicated documentation.
When the lender confirms your car’s information and you have signed the contracts, the remainder of the process is usually straightforward and rapid.
5. Variable Loan Amounts Corresponding to Car Value
Since the size of the loan is based on the market value of your vehicle, you can borrow more with car loans than with unsecured loans or personal loans.
If your car is worth more, the lender will provide a bigger loan compared to what you need, usually up to 50%–70% of the car’s worth.
Wrapping Up
Logbook loans can offer rapid access to finance, particularly to those with few credit options. Nevertheless, the risks involved, most notably the loss of your car, require consideration.
Consider your financial status first, and read the terms and conditions of the loan very thoroughly before going further. This will save you from possible misadventures and keep your finances in check.
