We've all heard of the so called Log Book Loans but what are they and how do they work?
Well as the name suggests, it is a loan secured on your car's log book, but unlike payday loans where there is no security required, your car is offered as security. Therefore your car is at risk if you do not make the payments on time.
Payday loans are usually small amounts of cash of up to £1000 for a short period of time, usually a maximum of 30 days, but Log Book loans tend to be larger amounts of cash, depending on the value of your car and, over a longer period.
To be eligible for a Log Book loan you will obviously need to be the legal owner of a car, but other vehicles may be considered by lenders. The car must be less than 10 years old and have a current Mot, if appropriate, and insurance. It must also be free from any other finance or interest by a third party.
You will need to be over 18 years old and be able to provide proof of income, identity and be able to demonstrate the ability to repay the loan on time. Some lenders may complete a credit check but the majority do not. The amount you can borrow will depend on, amongst other things, the value of your car, but as a rule of thumb, this will be approximately 50% of the value of your car. The lender will retain your V5 log book until the loan is repaid and in some cases they may fit a tracker device to it. They will also register their financial interest with a credit checking service.
The initial application is usually made on-line, but you will need to present all the documentation and your car for inspection to the lender. This can be done at their premises or at a mutually agreed time and place.
Interest rates on Log Book loans may appear to be high in comparison to that charged by high street banks or main stream lenders, but log book lenders are providing a service to clients that may not be able to borrow from any other source or they may just need the cash quickly. If you do consider the interest rate to be too high, then you should consider alternative methods of finance before agreeing to their terms and conditions.
All the lenders will have terms and conditions attached to these loans and it is the borrower's responsibility to ensure that they understand these before entering in to an agreement.
If you fail to make the payments on time, your car will be at risk of repossession and the interest rate could spiral out of control. We cannot over emphasise this point, there are some very disturbing stories circulating on the internet about clients of logbook lenders losing their cars and being pursued for an ever increasing level of debt by debt collecting agencies.
If this seems harsh or unfair, remember, when you take out this type of loan, you are agreeing to repay on time and the penalty for not doing so could result in some, or all of the actions described.
Remember, Borrow Responsibly and Repay On Time
We hope you find this article interesting and informative. When choosing a loan or a lender or making any financial decision, it is important to make an informed choice.
For more information on different types of loans please visit my loans and financial news blog @
http://www.moneycashandloans.com/
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