Logbook loans are easy and fast to get because they do not have a lot of background checks. Many people with low credit score are turned down by banks because they are seen as high-risk parties. One of the best options in such a situation is the logbook loan that is borrowed against a personal vehicle. Though the loans have higher interest rates, the borrower is guaranteed about half the value of the car. Before signing a logbook loan, here are the most important things you must comprehensively review.
Benefits of going for logbook loans
- Your credit score does not count. All you need is to have a well-maintained car and its logbook.
- The amount you can get is only limited by the car value.
- The loans are processed very fast so that you can have the entire process completed and money deposited in your account in just a couple of days.
- Depending on the lender, there is an opportunity to review the terms of the agreement if you need to extend the repayment period.
The most important things to review before signing a logbook loan
- Other available loan options
Two things that you must contend with about logbook loans are that they attract very high interest and are very risky. Therefore, you need to review available alternatives before signing the loan. Think of all the options that have a lower level of risk. While some of them might be less appealing, they could be better compared to the Logbook loans. For example, think of seeking some financial assistance from a close friend or relative. Make it structured by telling your friend that the money will be refunded directly from your monthly pay to build trust.
- The logbook loan company of choice
Tame some moment to look at the lender of choice. How well has the lender been handling past clients? You should look for a lender who understands clients and is not prompt in taking away their cars. In many cases, cars are the next biggest investments after houses. Make sure to read feedbacks from past clients and where possible talk to several. If you are relying on salary and it is late with a couple of days, the best lender should not cart the car away immediately.
- The APR (annual percentage rate)
While you can expect the logbook loans to be higher in comparison to other loans from banks, it is advisable to look for lenders with lower rates. Because the interest rates range from 100% to 400% APR, a lender with a lower rate will guarantee you of higher value from the deal. In some situations, lenders even allow clients to negotiate for the rates.
- The risks associated with the loan
When you sign for a logbook loan, the collateral is the car. You allow the lender to take the car away and sell it to recover his money if you cannot repay. In fact, it is better to put it in a different way. The papers you sign for the loan transfers the ownership of the vehicle to the lender until the entire loan is cleared. The lender owns the car, though you are allowed to keep and continue using it during the loan repayment period.
If you default on the repayment, the lender is allowed to come for the car and sell it to recover the remaining part of the money. Note that everything does not end there! If the lender sells the vehicle and the amount does not cover the entire loan, you can still be sued to recover the remaining amount.