Everything You Need to Know about Getting a Logbook Loan
If you’re considering logbook loans as a lending option, it’s important to fully understand what they are, how they work, and all the possible outcomes. Knowing what to expect before and after you enquire can help you make better choices about your finances.
What Is a Logbook Loan?
Often called a “Title loan” in the US or "v5 loans" in some areas of the UK, it is a loan that is based on the value of your car. The lending industry determines your car’s value based on the make, model, year, mileage, and other factors, and you can receive money based on that estimate. These loans are available for absolutely any reason, whether you want to purchase holiday gifts, consolidate debts, or cover emergency expenses.
They do have interest, and these interest rates are usually higher than those associated with more traditional forms of lending, such as personal loans from a bank. However, because providers of loans against cars typically have less stringent credit requirements, these higher interest rates help them mitigate their risk in lending. Like other loans, the more quickly you repay it, the less interest you will pay over time.
What If You Have Bad Credit?
A logbook loan is considered a secured loan because you use your car as collateral. If you default on your payments, the lender can legally take possession of your car and sell it to recoup its losses and reduce risk. Because of this, logbook lenders often have far less stringent credit requirements than banks or other traditional lenders, which means you may still qualify for money even if you have bad credit.
Credit checks are always required, but challenged credit is not always an issue. If you can provide proof of your income, you may still qualify. The best way to find out is to enquire.
The Best Way to Enquire
If you think a logbook loan may be the right choice for your needs, the best way to find out whether you qualify – and how much you qualify for – is to enquire through a reputable company. Some websites allow you to fill out one form to enquire about loans with multiple lenders, which can save you time and trouble. If you qualify for a loan through one of those lenders, you will be redirected to that lender’s site to review all the terms and conditions, such as the proposed loan amount, the interest rate, and the repayment schedule.
When enquiring, you will need to gather information about yourself, your car, your employer, and your bank account. These pieces of information will be used by lenders to determine whether you qualify and how much you might qualify for. Different lenders have different requirements, so not everyone will see the same results. Things like loan offers, interest rates, and repayment terms may vary, and approval is not guaranteed.
How Much Can You Get?
After the value of your car has been determined, you could receive up to 80% of the car’s value in the form of a loan. The minimum loan amount is £250 and the maximum is £50,000. You can only receive a loan on a car, which means things like recreational vehicles, motorcycles, and boats do not qualify. There are many factors that lenders consider when determining the value of your car, too. Having an older car will not prevent you from being approved for a loan, and in some cases, you may even qualify if you still owe a small amount on your car.
How Do You Repay the Loan?
Once again, different lenders have different repayment terms. For the most part, you will be required to make a monthly payment on the loan amount, and you can choose to repay it over 12, 18, or 36 months. The longer your repayment term, the smaller your monthly payments, but the more interest you will pay over time. For the absolute best results, make sure that the term you select (if given the option) allows for payments you can afford.
Like other types of loans, you also have the option to repay your v5 loan early and save yourself some money when it comes to the interest rates. You can pay more than the minimum monthly payment to have that amount applied to the principal balance of the loan, or you can make one large balloon payment at any time to pay the loan off in full.
Logbook loans are fantastic alternatives to more traditional forms of lending, which often require borrowers to have excellent credit. If you have a car and the ability to make monthly payments comfortably, it is certainly a choice that you may want to consider.