With the popularity of logbook loans growing so rapidly more and more people are searching online for information about how logbook loans work. This article will explain some of the features of these loans and the details of how they work.
The easiest way to describe a logbook loan is that it is a loan which is secured against your vehicle. The term 'logbook' or 'v5' refers to the document which comes with every vehicle in the UK and the reason logbook loans have this name is because the lender will retain the logbook for the duration of the loan.
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Logbook loans are very much different from other types of loans and this is because they are secured against an asset rather than yourself. So, for instance if you went to your bank for a loan they would most likely look at your credit rating and establish your level of risk and from this offer you a loan. With a logbook loan, the lender would assess the value of your vehicle and then offer you a loan based on this.
Another key difference in the way these loans work is that the lenders providing them do not conduct credit checks at all. This makes them a popular choice for individuals who are unable to obtain credit elsewhere and who may have a history of poor credit -CCJs, bankruptcy and so on.
V5 loans are often an easy way to obtain credit quickly. With a regular bank loan you may have to wait some time for the relevant paperwork, checks and formalities to be completed. Logbook loans can often be provided within 24 hours. It's simply a matter of starting your application online, waiting for the lender to get back to you and then meeting with them to complete the paperwork.
These loans do carry a higher interest rate than other credit options. This is due to the fact that often the people borrowing money using these loans have a history of non payment of debts which makes them a risk to lend to. The lender takes a big risk by lending money to them therefore the interest rate charged is higher. Logbook loans can be used for any purpose. Often, people use these loans for borrowing in the short term - such as to pay an unexpected bill or some emergency repairs and then when they get paid they are able to repay the loan quickly.
The flexibility of these loans makes them a popular choice. Most companies out there do not charge a free for early repayment of the loan - unlike banks, who will often charge you for doing this.
For the duration of the loan, the lender will usually keep the vehicles logbook and then return it at the end of the loan. You are able to continue driving your vehicle and using as normal throughout the loan.
Remember that a logbook lender will want to see that you are earning regular income and have the ability to repay the loan. As a last resort, you could lose your vehicle if you are unable to pay the loan back but this is always a last resort and the lender will try and work out a repayment plan with you if you get into trouble.
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