Taking a logbook loan is considered the first line of action when credit from a conventional bank is declined. However, the rising cases of non-payment, cars recovery and court battles point at a more serious problem that requires an urgent address. Financial experts and Consumer Advice encourage people in the UK to seek alternatives before going for logbook loans. If you decide to go for a logbook loan because of poor credit score, there might be additional sources such as credit union.

If you have to take a logbook loan, it is advisable to negotiate for a guarantee of better results. Logbook loan dealers, like other enterprises, are in business and will not hold back to any effort to win more clients and promote their brand. This opens the way for borrowers to negotiate for better deals and ultimately higher value for money.

Punitive clauses in the logbook loan agreement

The logbook loan agreement is the bottom line to getting cash against the car. Unlike the common bank loans that are governed by strict policy and individual institution’s guidelines, logbook loan companies are free to craft their rules. Well, this does not mean that they are not regulated, but the borrower is not protected like in the case of hire purchase. Therefore, you must base the negotiation on the hidden punitive clauses in the agreement.

Read the agreement comprehensively and identify sections that penalize early repayment or other unnecessary admin related charges. Even though you are taking a logbook loan for 18 months, why should you be penalized for clearing the debt earlier? Some two possible options for this could be;

  • Creating the entire amount within a shorter time without getting penalized.
  • Getting a new rate (incentive) for clearing the loan faster.

The annual percentage interest rate (APR)

The APRs charged by logbook companies are very high. At times, the interest can be as high as 400%. This means that if you borrow £1,000 over 12 months period with a flat rate of 96% per annum and 300.3% APR, the total charge will be £960.08. By the end of the loan period, you will have paid a total of £1,960.06. This is almost double the amount you had borrowed! The amount can even be higher if the APR was higher.

To negotiate for a lower APR, it is important to look around at what others are offering. If you identify a dealer with lower rates but undesirable conditions, use the APR to ask for lower rates. In fact, you can even put a proposal across. To be a good negotiator, you must demonstrate the willingness to walk away. Most entrepreneurs will not let you take business elsewhere.

Repayment flexibility

As a borrower, you should insist on getting loan repayment flexibility. Once you hit the road of repaying the logbook loan, issues can arise in the way and result to skipping a month or remitting the cash late. For example, issues can arise with the salary making your repayment to delay with a couple of weeks. Because these are issues out of your control, it is important to insist that the lender provides for some flexibility.

Though a specific date for repayment will be fixed, ensure to press for a grace period of about one month. Even if there is a slight decline in personal revenue, the lender should have room for adjustment. For example, if you were repaying £110 every month, the lender should allow a margin for slight fluctuations such as a drop to £100.

Before signing the logbook loan agreement, it is important to negotiate as much as you can for highest possible monetary value.