The term “bad credit” is a very sensitive subject in the financial world. Lenders, in essence, view individuals with a poor credit rating as a risk to the well-being of their business and rarely offer them credit facilities. In fact, it is correct to say that individuals with a poor credit history generally find it difficult getting access to credit facilities or a mobile phone contract. For a long time, this was the standard mode of operation so much so that those with a poor credit rating felt like second class citizens.
There was hue and cry, distress, depression and a low self-esteem among those with a poor credit score. Applying for a loan or a phone contract became a nightmare of sorts and those with bad credit had to contend with the all famous line “we are sorry but we can’t approve your application at this time”. Well, this was the case before V5 loans became a reality. V5 loans or what is commonly known as logbook loans indeed changed the loan industry in ways never seen before.
With logbook loans, individuals could now apply for emergency loans without having to worry about the status of their credit score.
How logbook loans work
If you are thinking of applying for a logbook loan for the very first time, you probably need more information on how this amazing and lifesaving loan product works. For starters, in order to qualify for a logbook loan, you need to be a legal owner of a car, a van, a caravan, a motorcycle or even a lorry. The reason for this is because logbook loans are secured using a car’s logbook. You sign off your car logbook to the lender in exchange for the amount you receive as a loan. When you do this, your car becomes the property of the lender for the duration of the loan. However, you continue using the car as you make repayments.
Ordinarily, UK logbook loan lenders advance logbook loans up to 50% of the value of your car. To determine how much you are privy to when applying for a logbook loan, it is essential that you provide your lender with your car registration. They will then evaluate its worth and advice you accordingly. However, there are a number of things you can do to ensure that you increase your chances of approval or even the maximum amount you can apply for. For one, you need to regularly service your car so that it’s in good condition. The insurance and tax details of your car need to be up to date not to mention the car needs to be free of any financial charges. The standard duration for a logbook loan is 78 weeks which gives you the flexibility to plan your repayment without feeling as if your back is against the wall.
Things to note
Getting approved for a loan facility despite your credit score status is a beautiful thing. However, you need be cognisant of the fact that defaults could put your car in jeopardy. In fact, you risk losing your car if you fall way back in repayments. Logbook loan lenders have the legal right to repossess and sell your car if you are unable to meet your logbook loan obligations. You can also be sued especially if the proceeds from the sale of your car are not sufficient to meet the principal amount together with the accrued interest!