Many people in the United Kingdom owe huge sums of money to their creditors. As per the Office of National Statistics, at the beginning of last year, the average debt for each household was fixed at £11,800. This particular figure involved student loans also but excluded home mortgages. The study went on to show that many people in the nation were in huge debt. The Office of National Statistics also pointed out that homes in the United Kingdom owed typically more than 25% of their yearly earnings to credit card dues and personal loans. Despite all this, borrowing money has always been expensive. Not many people have been fortunate in the country to secure loans on high streets in order to enjoy interest rates of just above three per cent per annum.
People have been gradually moving towards logbook loans. This article will deal with showing you how you can go about initiating a logbook loan. As it is a costly way of borrowing, people who decide to opt for logbook loans almost always have poor credit rating and are not home owners. They fail to borrow money at cheap interest rates and through loans that are secured with their property as collateral.
How do you initiate a logbook loan?
A logbook loan, as suggested by its name, is always secured on the car owned by the borrower. It means that the lender has the right or lien on the borrower’s car until he or she repays the loan in full. Under the loan terms, the borrower would be allowed to continue using the vehicle as long as the loan instalments are being regularly paid. The vehicle could be seized by the lender when the borrower defaults on the loan repayment.
As any other type of a loan, logbook loans could be taken out either online or on the high streets. Logbook loan lenders would typically offer amounts ranging between £250 and £100,000. It has to be noted that the lenders charge a high Annual Percentage Rate of anywhere between 100% and 450%. This is in comparison with bank loans and many high street loans being made available to people who have good credit rating with APRs that can be as low as 5% per annum.
Repayment period for logbook loans could be anywhere between three and six months. There are few lenders who would offer loans even up to tenure of sixty months. The amount that can be borrowed will depend on the current market value of your car and that is what this whole loan is secured on. Some lenders will calculate the amount on 50% of the car’s current market value while others may offer up to 70% of the current market worth of the car. The conditions and terms of a logbook loan may vary from one particular lender to another.
When you initiate a logbook loan, you have to hand over the registration document of the car or the V5C to the lender. The lender will use this document as a lien against the loan until the entire debt has been cleared by you. You will be allowed to use the car while you are repaying the loan with regular monthly instalments. Defaulting will lead to the lender seizing your car. The car will be auctioned or sold in the open market to recover the balance amount of the loan due to the lender.
Residents of England, Northern Ireland and Wales will have to enter into a credit agreement along with a Bill of Sale. This assigns temporary ownership of your vehicle to the lender but when you make the payments on a regular basis towards settling the loan amount, you can continue to retain your vehicle. The Bill of Sale has to be registered with the High Courts. Residents of Scotland cannot use the Bill of Sale as it is not recognised there; hence, the logbook loan cannot be applied for in Scotland.
In order to be eligible for the logbook loan, your car must pass the Ministry of Transport (MoT) test and it must also be comprehensively insured. Some lenders in the United Kingdom are cautious in extending loans to people whose cars are older than ten years. If a borrower has his or her car tied up with any other finance agreement, it would not be possible to apply for a logbook loan.