Logbook loans are becoming more mainstream and a favourite of many as a source of quick cash. This is probably because of the short time it takes to be approved or the fact that one can easily bypass credit checks. After all, all you need is your V5 documents and perhaps that’s why these loans are sometimes referred to as V5 loans. However, before signing up for a loan, you need to think about it as there are some serious repercussions that can occur if you fail to keep up with payments. To simplify it for you, here is a list of the top things you should always bear in mind before going out of your way to take a logbook loan.
Think about the worst
Being a secured kind of loan, you will be required to set your car as collateral. And even though you still get to stay with your car and use it as usual, the lender is actually the legal owner. Remember, he/she gets to keep your V5 document (what proves that you are the legal owner) for the entire loan period until you clear it. In simpler words, during the loan term, you transfer ownership to the logbook lender and in the eyes of the law, they have the right to repossess your car if you do not keep your end of the deal.
Therefore before signing up for this loan ensure you envisage the worst case scenario. What would you do if you can’t afford the loan anymore and they have to take your car? DO you have a backup plan? How would you move about?
Have a good reason for borrowing the loan
Before you apply for a logbook loan, ensure you have identified the purpose you have for the money. One beauty with borrowing from a logbook lender is that they will never restrict the way you want to spend the loan. You will have the freedom to do whatsoever you want including paying bills, attending to urgent matters or even going for a vacation. However, you need to realise that logbooks loans are quite expensive and despite the freedom you’re given, you should be extremely careful on how you spend the money. Only important and urgent things should make it worthwhile to overlook the high cost of a logbook loan.
The amount you want
It is important to think about how much money you will need as there are some restrictions that apply. First, you will receive as much money as the value of your car. For instance there’s no need placing your £10000 car on the line when you only need £500. Just go for a different source as this gives you access to borrow more than you need. With it also comes the temptation to spend the cash on unplanned expenses.
Your financial standing
Before signing up for logbook loan, ensure you have a close peep into your financial situation. How much money do you earn and are you employed or not? In most cases, people opt for logbook loans coz of poor credit history. So if you have had issues handling your finances before then you need to think through what you are about to do. Remember, you will have to make monthly payments and delays only mean more fees and charges. So, ensure you can afford the loan before borrowing to avoid plunging yourself deep into a deeper financial mess.