Greater Regulation for Logbook Loan Providers

Companies that offer people short term finance through logbook loans are now under more regulation than they have ever been before.  The age of the internet made it very easy to apply for a logbook loan, just by logging on to a computer.  Just a few clicks and you can receive the money you need on the same day.

However it all became too easy for lenders to make claims about their loans that were not entirely truthful in terms of the costs of taking out a loan and other hidden costs.  It got to a stage where organisations such as the Citizens Advice Bureau had so many complaints about lenders that something needed to be done.

The Financial Conduct Authority has stepped in to oversee the short term loans industry, amongst others.  They are there to make sure that firms comply with their rules or face not being able to trade.  Companies need to be initially vetted by the Authority to check if they are fit to trade and they will then be assessed on a regular basis to make sure that they are conforming to the standards.  If they don’t meet these standards the punishments are harsh, they will have to stop trading.Loan regulators

Customers who have suffered the brunt of these bad lending practices will be pleased that regulation has arrived.  For them they might feel it is too late but new borrowers will see the benefits.

One of the clearest signs of regulation is the prominent positioning on lenders websites of the costs of taking out a loan, clear representative examples need to be given in an area of the website that is easy to see.  The examples cannot just be hidden at the bottom of the page or put in small writing.  This is simple but if it is not carried out it will mean problems for the lender.

Most customers are used to shopping online, but the world of short term loans can be slightly different.  Often people are on the lookout for a loan because they are desperate for money and if someone offers them a good amount based on the value of their car they will take it.  They often think about the consequences later, which is why the industry needs to be all the more careful to vet borrowers when they are applying for loans.

It is no good for the company or the lender if the borrower defaults on payment and so with greater restrictions on who can borrow, problems with repossessions can be avoided in many cases.

 

Facts about Logbook Loans

Also known as a short term loans, this type of finance is quite simple and could provide you with the money you need, hassle free.  At some point in our lives we may need a cash injection to help us pay for an emergency or a dreaded bill.

These types of loans are very handy as they may give you the chance to have access to quick, easy cash without having any credit checks completed, and this could all happen in 24 hours.Piggy bank

Some facts about Logbook loans:

  • You can have the money transferred into your account the same day as making your first enquiry.
  • Depending on your lender, they may offer you up to 70% of the value of your vehicle.
  • There are no credit checks.
  • No need to tell your lender what the money is being used for.
  • The vehicle must not be older than 10 years old – vintage cars may be acceptable providing they have some value to them.
  • There must be no money to pay back or very little (1 – 2) payments left on the vehicle.
  • The vehicle must be fully insured and have an up to date MOT.
  • You will need to show your lender that you have money coming in on a regular basis.
  • You will need to prove that you are a UK resident and are over 18 years old.
  • You need to be the legal owner of the vehicle (your name must be on the logbook).
  • The vehicle must have a Logbook/V5.

These facts are what most lenders will require in order to accept you for a logbook loan. Different lenders will have different criteria to meet, but on the whole of things these are usually the same with most lenders.  Do a comparison of logbook loan lenders at a site like LogbookLoanAdvice.org.uk to see what the criteria are for different companies.

You may notice a big difference in the interest rates with different lenders; some can be quite a lot less than others which is why it is important to look around at all the different lenders to get the loan that is right for you.

Logbook loans are known for their high interest rates compared to other forms of personal finance so you will be aware when you apply for this you won’t be getting the best package out there. Some people may ask ‘Why should you spend greater amounts of cash on a v5 loan compared to another type of finance?’  The answer is not everyone has any credit history or some may have bad credit and not be accepted anywhere else, which is why they have to take out a logbook loan.

Short term loans were designed for those who do not have any credit history or who had bad credit history.  Some people may be lucky and have family and friends who are in a position to lend money and others may not, which is where logbook loans step in.  They can afford to charge high interest rates as some people have no other means of borrowing money.

This way both parties are happy, the borrower gets to borrow the funds and the lenders have the vehicle as security. The borrower still gets to keep the vehicle providing they keep up with the payments.

If you are having problems with debts here is a video that might help you start to get back on track.

Reasons to Get a Logbook Loan

In recent years there has been a significant rise in emergency or short term loans since the conventional loans offered on the high street are much more difficult to come by for businesses and private individuals. When looking for emergency funds you might find a good option could be a logbook loan. They rely on a registered vehicle as collateral in the approval process and are quick and easy to apply.

These are some reasons why logbook loans have been established as a highly popular option for receiving a quick injection of cash.Money ladder

Fast and Easy

One of the main attractions to logbook loans is that they are quick and easy. In most situations it is possible to have the requested money put into your account within 24 hours of making your first initial enquiry. Unlike a traditional loan where the process is likely to go through stages of supplying a range of documentation, an in- depth application form and waiting for credit checks to be completed. Depending on the lender you can either have the money transferred into your account or if you don’t have a bank account or would prefer the cash you can arrange with the lender to meet in person and collect the cash.

No credit history, no problem

As logbook loans use your vehicle as collateral for the loan, it is very appealing to those who do not have the best credit rating.  It is also appealing to those who are self-employed and struggle to get a loan elsewhere. Those who are unemployed may also apply providing they have some sort of income, most lenders would be happy to lend to a borrower providing they had a way of paying back the loan.

Apply in the comfort of your home

Another aspect of a logbook loan is not only is it a quick and easy process but your application can be completed in the comfort of your home within minutes. You will need to answer a few questions online relating to the applicant and the vehicle you will be using as collateral. You will usually have your initial approval  arranged within minutes, the formal approval may be agreed within hours of making the first initial application.

Easily met eligibility requirements 

When it comes to applying for a logbook loan you may appreciate that you will need to meet some criteria, which is usually straightforward. Depending on the lender, they may need more than others, but the usual eligibility requirements you will need to meet are:

  • The vehicle must not be older than 10years old. Some lenders may accept older cars if they are classics and have some value to them.
  • The applicant must be over 18 years old and be a UK resident.
  • The vehicle must have very little finance left (1 to 2 payments) or be free of finance.
  • The logbook/V5 will need to be available to hand to the logbook company.

The logbook loan industry is also newly regulated by the Financial Conduct Authority so you can be sure that any bad reputation that the industry once had is being improved dramatically.

It is up to individual lenders to police themselves as much as possible of course, however there is often only so much that can be done from the inside and outside regulators need to come in to improve things for the better.

Thinking of a Logbook Loan? Avoid Getting into Bad Debt

When many people take out a logbook loan it is because they are struggling with debt.  If only they had managed their finances properly in the first place, they might not be in such a tricky situation.  If you are thinking about taking out a v5 loan and borrowing against your car here are a few tips to make sure you don’t get into money problems again.

This article is full of useful advice however it is not a substitute for speaking to a well trained advisor at the Citizens Advice Bureau, speak to them if you are in financial difficulty to get free impartial advice.

Personal Finance Calculator

Set yourself a monthly budget

Write down what your income is and what your outgoings are. This will help you to see rather than having a rough estimate. Set aside a reasonable amount you can afford to put in for your savings, essential expenses and mortgage/rent payments. This will help you not to overspend.

Use cash

When using your credit or debit card you may encounter some charges that might affect your account. It would benefit you to withdraw a daily or weekly amount and manage the payments on the day. This can include your daily travel expenses. Each individual has different requirements and some may need more than others.

Set up a direct debit

When it comes to utility bills and other fixed payments you should arrange a direct debit as it will help you to avoid rising interest payments. Some business may even offer you a discount when you set up a direct payment.  When you apply for a logbook loan, lenders should ask you about the direct debits you have coming out of your account as well as other expenses.

Check your finances regularly

Setting up a yearly budget at the beginning of the year it is an efficient way to keep your finances on track. It is also very important to review your expenses on a daily basis to see that the payments you are making are working out.  Try and keep some money aside if you have a birthday coming up or it is the festive season.

Saving Money

Another way to save money is by shopping in discount stores and possibly using some money off vouchers to help keep the cost low. If you own a vehicle, maybe try walking more and saving yourself petrol.  Instead of buying lunch everyday make yourself a packed lunch to take with you.

The UK has a £1.459 trillion outstanding personal debts. Financial figures also show that 1880 people have been made redundant each day between January to March, this obviously hasn’t helped their financial situation.

Here is an interesting video that will help if you find yourself in difficult debt problems.

Does a Logbook Lender own your Vehicle?

People can often be confused when it comes to the ins and out of logbook loans.  As with other short term loans like the Payday type, they don’t get a particularly good press.

When you take out a logbook loan you are handing the ownership of the car over to the company that is lending you the loan, for the period of time that you have the loan for.  So for example if you have a loan that has a duration of 2 years, your vehicle will be owned by the logbook lender for that period of 2 years unless you pay the loan back early.

A Bill of Sale is drawn up that you will sign when you decide on a loan and that will in effect give the lender the right to repossess the vehicle.  It means that the lender doesn’t need to go to court in order to take ownership of the vehicle.Car for sale

Confusion has been brought about by less than reputable lenders in the past who have used these laws to their advantage and repossess vehicles very quickly.  A good lender should not do this and will allow you time to pay the loan back without issues.

Another problem that these laws have brought about is the sale of a car with a logbook loan attached to it.  This happens when someone borrows against a car and then sells the vehicle on without telling the seller that there is a logbook loan on the car.  If the buyer has not conducted a history check on the car they have no idea that there is outstanding finance on the vehicle.  If the original seller does not pay the loan then the new buyer is liable to pay the balance or the vehicle will be repossessed.

Because the lender has the legal right to repossess the car there is nothing the buyer can do about it.  One course of action might be to take the seller of the car to court, but most end up trying to negotiate a settlement with the lender to not repossess the car.

Debt charities in the UK find these issues all too frequently and many believe that the law should be changed to reduce this risk when you buy a second hand vehicle.  Some vehicle history check companies offer a guarantee that if you use them to check the history of a vehicle, if there is an outstanding loan that they have missed they will compensate you for your loss.  This is a useful service that should help you to feel more secure when buying a second hand car.  It is worth paying the small fee compared to the problems you could run into if you were to take the risk.

Logbook lenders do own your vehicle when you take out a loan.  In most cases this runs smoothly if you keep up with the regular payments or pay back the loan early.