In Great Britain, some loans require the borrower to surrender possession of their vehicles V5 ownership and license registration papers. These are called logbook loans because logbook is the common name for V5 documentation. These loans are different than a bank loan where a vehicle is put up as security.
The logbook loan process sees borrowers give their V5 papers to the loan company. The borrower signs a contract. The contract allows the company to transfer ownership of the vehicle to itself should the borrower fail to make their payments on the loan. The borrower maintains possession and use of the vehicle only so long as the loan is kept current. In effect, the logbook lending contract becomes a bill of sale if the borrower violates the terms of the loan agreement.
The vehicle then becomes the legal property of the lender. Where the lender has retained a copy of the keys, repossession becomes a matter of merely finding the vehicle and driving it away. Where lenders are unable to locate the vehicle, charges of criminal auto theft can be laid against the borrower.
Some logbook finance companies promote their service as being credit check free. Others companies say that, while no one will be refused on the basis of their credit score, the score is used to determine the interest rate charged. In general, interest rates on logbook loans are the highest the law will allow. For a loan that is repaid within one month, service and interest charges typically are 10 percent of the value of the loan.
Logbook loans should only be used as a very short term solution to a financial crisis. If you are not dead certain you can repay the loan within a month or six weeks, you are better off selling the vehicle outright. But if you can pay out the loan in that time frame, a logbook financial solution maybe your only choice.
One of the reasons V5 papers constitute the paper security that changes hands in a logbook loan is that the V5 registration is proof of who actually owns the vehicle. Logbook loans are only made on vehicles that are paid for in full. If you are still making payments on your auto or motorcycle or caravan or lorry, you are not eligible for a Logbook loan.
Logbook loans have become popular in the United Kingdom over the past several years. Like their close cousin, payday loans, logbook loans are criticized by those who have better choices available to them. But secured loans are the only options people with poor credit have when faced with a financial crisis.
When contemplating resolving a financial problem through logbook financing, proceed with caution. To totally secure the loan, companies that make logbook secured loans take physical control of the logbook licensing, ownership and registration documentation.
Companies that make logbook loans take a copy of the vehicle keys, whether the vehicle is a caravan, motorbike, lorry, bus or automobile. In addition, the logbook loans firm will also install a tracking device on your vehicle. Do not consider a logbook loan until you know how much you will owe each week. Note the use of the word week. Read the contract carefully. Do not make the mistake of asking how much your payments will be and then assuming it is a monthly payment. In these types of loans, payments are usually calculated weekly.
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