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.

Are Logbook Loans Risky?

Logbook loans are designed for those who may not be able to borrow money from traditional means, for instance a bank loan.  With a V5 loan you do not need to have a fantastic credit history but on the downside you will have high interest to pay, as with most short term loans.   However logbook finance is a risky way to borrow and there are lenders who are waiting to trap those who may not necessarily be aware of the pitfalls of borrowing money in this way.Risky loans

No credit checks

Lenders promise quick cash without the need for a credit check, which is likely to seem attractive to those who have no means of securing the funds elsewhere.  These types of loans may seem similar to every other loan but they have different risks which makes this method different and extremely risky for those who may already have a poor financial history.

People might have a rough idea of what a logbook loan is and in simple terms it is similar to a mortgage in respect that a mortgage is secured against a house and a logbook loan is secured against a vehicle.

The lenders will offer anything from £500 to £50,000 depending on the official trade value of the vehicle you are borrowing for, which is usually up to 50% the vehicles trade value.

Bill of Sale

In order to secure the debt when the paperwork is being finalised before the funds get transferred, a temporary Bill of Sale will be signed and the borrower will hand over their logbook.  The borrower will be able to drive the vehicle although the temporary Bill of Sale gives the lender full ownership of the vehicle until the customer has paid the loan back in full.  Not only does the Bill of Sale give the lender full ownership, it temporarily allows them to repossess the vehicle if the borrower fails to keep up with the payments, without a court order.

As these kind of loans are short term they usually run for a number of weeks and are generally paid back by direct debit, or the borrower may call up monthly to repay this.  Some lenders might charge early settlement fees, so it is important that you check to see if this applies to your chosen lender if you feel this is something that might affect you.

Most of the time you will be paying back more than the original loan, which is why you need to be certain that you are in desperate need of this cash and that you are able to repay the money as most of those who miss a single payment end up in financial difficulty and struggle to find a way out.

Consequences of non payment

One of the serious aspects of taking out a logbook loan are the repercussions that could occur if the customer were to fall behind with the repayments.  When the customer signs over the vehicle in order to secure the loan they will do this with the knowledge that the vehicle will be repossessed if they fail to keep up the payments of the loan.  The company will be forced to sell the vehicle in order to recover the defaulted sum.

The circumstances in which the vehicle can be repossessed vary from lender to lender,  but most will not take action to repossess the vehicle until several payments have been missed.  This will be used as the last resort as it has been proven to be a costly procedure.  Depending on the company some may charge for every phone call and letter they send out.  They will also need to pay a specialist repossession agency in order to collect the vehicle, which ends up running into hundreds of pounds.  All these extra charges end up being combined together and may make it impossible for many borrowers to repay this debt, let alone recover the vehicle.

 

Are all V5 Loans the Same?

A quick look around at some of the main logbook loan providers and it will look like each of them are offering the same service.  Fast cash within hours and you can borrow flexible amounts.Comparing loans

Interest rates

However this isn’t always the case.  Lenders have varying interest rates on their loans.  Some lenders have far higher interest rates than others, they may have streamlined their costs and are able to offer a cheaper service, or they are trying to undercut the competition.  Whatever the reason, you can save a good deal of money by using one of the cheaper lenders.  Use a site that compares the different providers and shows you the interest rates side by side.

Administration fees

Not all lenders include all their fees in their interest rates, they may charge an administration fee to get the loan up and running.  If you can avoid this fee it could save you money and there is no point in using a particular lender if you can find exactly the same deal for cheaper elsewhere.

Late payment fees

If you are unfortunate and can’t make your monthly repayments, find out what the fees if any are for not being able to make the payment.  Some lenders will not charge you any fees, only interest, whereas others might charge a fee for not paying on time.  Ask about this before you take out the loan.

Personal service

Some lenders will come to you to finalise the loan because  they have agents nationwide, whereas others will ask you to go to one of their shops or offices.  What is easier for you depends on your situation, however many find it easier if a lenders representative can go to them or at least meet them in a convenient location for them.

Knowledgeable customer service team

When you speak to the advisors at the lender do they seem knowledgeable and able to answer all of your questions?  If they are then this is a good sign that they are a good company to work with.  This is only none of the indicators you should look at, but it can help.

 

Think Before Taking Out a Logbook Loan

When doing any kind of financial deal it is always best to prepare for it before hand and run through the various options that are available to you.  It rarely pays off to just go ahead with something and hope that it goes well without putting thought into it.

When taking out a logbook loan it is vital to make sure that you have looked at all the different options available to you before you agree to the loan.  Don’t just go to the first company you see advertised because you think they have a good deal.  You might be missing out on other deals which will save you more money or be better suited to you.

Analyse different lenders

Thinking

Not every company has the same track record either so check the various providers to see if they have good ratings on review websites or do a Google search for them so you give yourself a better idea of the customer sentiment towards them.

The V5 loan industry has been notorious in the past for lenders being too happy to repossess cars and for poor customer service.  Lenders thought they could get away with treating some customers badly because the people taking out loans had no other options and they were desperate.  They could charge very high interest rates and recall loans as soon as they were defaulted on.

Luckily most companies do not operate in that way any more, partly because the market is regulated now.  However it is still important to check whether a company has good credentials and treats it’s customers well.

Is a V5 loan right for you?

Think carefully about whether a V5 loan is actually going to help you.  Do you think you will be able to pay it back quickly?  Are you using it for an essential purchase?  Do not take short term loans out if you are unsure you will be able to pay the money back.  This is very important because if you can’t pay the loan back you could lose your car to the lender, which means you will be even more out of pocket than you were before.

Some people find they end up in mountains of debt because they take out loans to cover other loans and it all adds up, causing them a lot of stress.  Make sure you don’t find yourself in this position.  If you are having trouble paying loans back, speak to someone as quickly as possible and find qualified loan advice.

 

Why Logbook Loans Are More Expensive

The short term loan market is notoriously more expensive than other areas of the finance industry.  This is mainly due to the simple reason that people will pay more for credit when they need cash fast and are running out of options.Debt Calculator

Logbook loans are no exception to this and they also have the target market of people who have poor credit records and so on’t have many options for finance left.

Because V5 loans are by their very nature short term, interest rates are also higher because the lender needs to make their profit in a shorter time scale.  A mortgage loan is for an average of 25 years, which means that the lender can charge lower rates because they are going to be earning interest payments for 25 years.  A logbook lender could only be earning interest payments for a matter of months, so lending the money needs to be worthwhile for them.

Borrowers are willing to pay more for short term loans because in some cases they are desperate for cash.  Lenders know this and so can charge high levels.  Luckily in a capitalist society what keeps interest rates down is the level of competition amongst lenders.  A new lender can enter the market and make quite a big impact by offering very low rates, this is a good way to establish a customer base.

In the case of logbook loans some lenders have been able to reduce costs and offer loans at significantly lower rates than their competitors, putting themselves in a good position.

These loans are only meant to be short term

Short term loans are easy to obtain but customers should not take them out lightly and they shouldn’t be used as a long term loan.  They can put people in financial difficulty quite quickly if they are used in the wrong way.  In the past these type of loans were only used very occasionally, however with the rise of the internet it has become easier to obtain a loan and it is more common to get into debt.

People used to be more frugal with their money and would only buy something when they could truly afford it.  Society has changed in recent years, meaning people are more comfortable with going into debt.  In the UK debt levels have risen significantly.

The following video looks at the debt problems in society in the UK.

Making Logbook Lending Fashionable

It’s increasingly common to see logbook lending criticised in the media, there are very rarely any positive stories about it.Newspaper

You could say that this is true for most other lending or in fact most other news because it is rare to find a positive story in the media. It’s clear to see however that it will be hard for the V5 loan industry to improve it’s reputation following all this negative press.

The industry is improving, there are reputable companies out there who offer good customer service and don’t try to rip customers off as soon as they default on payment. Unfortunately, as is quite common when negative media stories arise, everyone is tarred with the same brush.

The best lenders out there do offer modern and flexible lending solutions for their customers. With logbook lending we are never going to get around the fact that if you take out a loan you are putting your car at risk of repossession. This is inherent in the nature of the loan and customers do understand this in most cases. One of the main problems lies with the loan customers who sell on their vehicles before they have paid back the loan, passing the loan on to unsuspecting buyers.

This should be far less easy to do as it seems to be too tempting for some people. If they aren’t able to pay back a loan they just pass it onto someone else who has no idea that they are taking on the loan.

This really isn’t the logbook lenders fault, they need to claim their money back and if they were legally allowed to claim the money back from the individual who originally took out the loan, they probably would.  The buyer of the car is also not free from fault because they should have conducted a history check on the car before buying it.  This is quite simple and although it costs money it can save a lot more cash in the future.

If logbook lenders went more mainstream with their advertising they might be able to make lending more fashionable, rather than the more alternative form of financing that its image seems to be at the moment.  Lenders need something to counter the negative image that the industry has currently and this is probably the best way to do it.

Of course this type of advertising takes a big spend by the lenders and they may not be in the position to do this at the moment.

More Loans Aren’t The Right Answer To The UK’s Debt Problems

According to this video 9 million people in the UK have serious debt problems.

These people will all have various issues with debt, but one of the most common causes is taking out more loans than can be afforded, and short term loans are one of the major culprits in this. These loans are very easy to obtain in many cases and have high interest rates that can make them unaffordable for people on low incomes.

Unfortunately it is often people on low incomes who are attracted to the loans because it offers them quick access to cash that they otherwise would not have been able to find.

The main types of loan are payday and logbook loans and these are the types with the highest interest rates. Someone with a bad credit rating but who needs money fast is likely to be attracted to a logbook loan because they won’t be credit checked. They will only be judged on their ability to pay the loan back based on the information they give in the application. It is up to the individual lenders to approve or disprove their application.

The numbers of loans that are being taken out are only increasing and this is not going to improve the UK’s debt problems for the foreseeable future.

Misleading Customers is Bad For Business

Some logbook loan companies have become extremely efficient at giving customers the impression that their loans are better than others.  They have become creative with Annual Percentage Rates (APR’s) to make loans look like they cost less.

Luckily the introduction of tougher controls on logbook lenders means that companies are not able to use representative examples that are too good to be true.  If a customer is taking out a high interest short term loan they should know exactly how much it will cost them for the length of the loan and how much they are paying each month.Misleading

It is not right that customers were mislead and some companies only have themselves to blame for the industry having a bad name.

Customers talk, and if they have a good experience with a company they will pass that on to someone else and so on.  Word of mouth marketing is incredibly beneficial to a business because it is free, but also it provides social proof for the business and it spreads quickly.

The companies that grow the fastest are the ones that offer the best service.  The logbook loan companies that bully and hassle people when they are behind on their loan payments help no-one and it is a backward way of doing business.

Just look at this campaign from the Scottish government against Payday loans, the industry already has a bad name and it doesn’t need to be helped by companies bullying customers.

Payday and V5 loans have their use in society, the demand for them will probably never go away. We are in an unprecedented time following a recession where short term loans have become more popular than ever before and the ease of obtaining them is easier than before. This does not mean however that customers should be mislead in any way.

We will see in a few years if the reputation of short term loan providers has been cleaned up by the controls that have been brought in.

A Logbook Loan Or Saving Money

In this video people talk to the Money Advice Service about saving money.

Unfortunately many people who take out logbook loans or other short term types of finance find themselves with financial problems because they have not been taught how to manage money properly.  Being able to budget effectively and not spend more than your income is a skill that has to be learned for many people.

One of the most effective ways of making sure that you stay debt free is to save money consistently, setting goals for the amount of money you would like to save and sticking to that can help you a lot.  Logbook loans are useful when they help people improve their cash flow for a while and they then pay the loan back without incurring too much interest on the loan.  If the loan is kept any longer it can become very expensive, possibly more expensive than most other types of loan.

If there is a luxury that you need to pay for in the future such as a wedding, try putting money aside every month until you reach a target amount of cash.  Taking out a logbook loan is like doing everything backwards, why spend money you don’t have.  If you can’t afford what you are trying to pay then put it off until you have saved enough money to afford it.Planning to save momey

Of course putting purchases off isn’t always possible and everyone’s situation is different.  Obviously you need to be able to pay a gas bill as soon as possible but more luxurious items can be put off until you can actually afford them.  If you have to delay a wedding or are not able to have a weekend away then it is not the end of the world, you will be in a better financial position in the future because of this.

As with most things in life it is important to plan and prioritise when it comes to money.  Making a simple and straight forward budget can be a great way of saving money and paying for things that you really want.

Heavy Handed Debt Collection

This is an interesting video by Dispatches in the UK that shows some of the methods debt collection agencies go to.

It can be quite surprising that businesses are allowed to get away with this and we know that in the past some logbook loan companies have been guilty of heavy handed tactics when it comes to recovering money.  Repossessing vehicles that have logbook loans on them even though the car has been sold on is one of the issues that is being looked into by various bodies at the moment.  It doesn’t seem fair that companies should be allowed to get away with this tactic when the vehicle has been bought by an innocent person who has nothing to do with the original loan.

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.