Logbook loan
is a form of loan in the UK designed for people with poor or inadequate credit
history. Also known as V5 loan, it involves submitting the vehicle’s “logbook”
or V5 to the lender as collateral and the lender will maintain possession of it
until the loan is paid back in full.
With logbook
loans, anyone owning a vehicle can borrow money in as little as 24 hours
without having to pass credit checks. However, this convenience comes with a
price, such as the risk of losing a vehicle. Although it has helped a lot of
people in times of financial crises, logbook loan is not for everyone. These
are the things you need to consider before getting yourself in this type of
loan.
Why
do you need the money?
One beauty
with logbook loans is the freedom to use the borrowed money in any way you
want. You can pay for something urgent, such as medical bills, the vehicle’s
repair itself, and any other expenses wherein cash is not immediately
available. But you are also free to use the money even for non-emergency expenses,
such as your dream vacation or a high-end gadget.
However, you
have to realize that taking a logbook loan can be expensive, and despite the
freedom, you should be very careful in choosing where to spend your money. Only
things that are really important and urgent can make it easier to overlook the
higher cost of logbook loan.
How
much do you earn?
It’s simple
mathematics. You have to make weekly or monthly repayments for your loan, and
you need to have a stable source of income to meet them. What’s good with
logbook loan is that you can adjust the repayment terms based on your
affordability. However, if you don’t earn high enough, you might struggle to
meet the payments on time, which will in turn earn even more fees and
interests.
How
long are you looking to pay off the loan?
One
advantage of a logbook loan is its flexibility, because the duration of the
loan period can be adjusted based on the amount you intend to borrow and your
affordability. However, stretching out the loan term can cost you as much as
double or triple the original amount, which should question the worth of
borrowing.
Logbook loans UK are designed for short-term borrowing, and should be kept at such. It is best
used when you need to raise instant cash, and have adequate resources to repay
back the loan as quickly as possible to avoid incurring more interests.
How
much is your vehicle worth?
Another
factor to consider is the value of your vehicle. It might not make sense to put
a vehicle worth £10000 on the line when you only need to borrow £250. This
gives you access to borrow more than what you need, and with it the temptation
to spend the money on unplanned expenses.
Are
you ready for this commitment?
In majority
of the cases, a person resorts to logbook loan because of bad credit. If you’ve
had problems handling your finances in the past, you should think again and
again if you are ready to take on a new and bigger responsibility in the form
of a logbook loan.
