People are sometimes wary about logbook loans due to a lot of myths surrounding the industry.
The reality of loans on your car is vastly different from the misconceptions you might read in the media.
© Skrypnykov Dmytro / Shutterstock
In 2014, the Financial Conduct Authority became responsible for regulating the industry under the umbrella of consumer credit.
In years gone by, according to the FCA, the average amount borrowed against a vehicle was £1,000 and anyone who wanted a bigger loan would normally have to visit the bank.
Today, logbook loans are a viable means of raising finance on your vehicle and the amount borrowed is often anything up to £50,000 on a luxury car.
The industry is held in higher esteem today than in the early part of the 21st century, but despite this, those old myths still linger on.
This is potentially deterring people who might benefit from the services of a logbook lender. In this article, we’re going to look at the common misconceptions and debunk the myths.
How do logbook loans work?
A logbook loan is a means of borrowing money when you need it, rather than having to wait for a relatively long time for a bank or building society loan.
You can borrow between £500 and £50,000 from a reputable logbook lender, secured against your vehicle’s value.
In doing so, you can continue to drive your car while repaying the loan, meaning you’re not deprived from enjoying your pride and joy while the finance is outstanding.
There isn’t an early settlement penalty, as you might experience with some other loan options. On the contrary, if you settle early, you’ll pay less.
Apply online and the lender will check whether your vehicle qualifies. Then, produce evidence of your identity and proof that you can afford to repay the finance.
Loans are processed and approved on the same day and funds can be provided in as little as two hours. The money can be transferred to your bank account right away once all the paperwork has been signed.
As long as you’re the legal owner of the vehicle, a bad credit history may not necessarily exclude you from taking out a logbook loan.
Each applicant is treated on their own merit, with the vehicle’s value and the owner’s ability to repay being major factors.
Despite the transparency of the application process, logbook loans are still getting bad publicity in the press due to misconceptions.
Read on for various examples of myths surrounding logbook loans, with an explanation of the reality of the situation.
1. You’ll lose your car
There’s a common misconception that it’s a high-risk transaction and you’ll lose your car to the lender, going through the nightmare of repossession once you’ve signed on the dotted line.
Some people fear it’s a scam and worry they will say goodbye to their treasured vehicle forever once they hand over the V5.
Born out of a lack of understanding about how the system works, this is an exaggerated image of logbook loans, often based on sensational news stories.
While there’s a possibility you can lose your asset with any secured loan, there’s a long way to go before you reach this point with a logbook loan.
Nobody is going to sneak up to your home and repossess your car in secret overnight. Even if you stop paying regular instalments, the lender will try to work out an agreement with the borrower.
The lender will notify the owner in writing, and you’ll have fourteen days to respond. The vehicle becomes at risk only if you don’t make the payments and ignore the lender’s attempts to contact you to work out a repayment plan.
2. Your car will be assessed at a low price
A major fear for many borrowers is having their car valued at an incredibly low price. It’s a myth, however, that the lender will try to force you to accept a deal that leaves you at a distinct disadvantage.
Some car owners wrongly believe the lender is out to scam them by giving them a price well below market value and then repossessing the vehicle, leaving the owner with nothing to show for it.
The truth is that the value of each vehicle will be based on the lender receiving accurate information on the market value of the car from a reliable third-party source.
You won’t be bartered down or cajoled into accepting a ridiculously low price. Once the car is valued correctly, you’ll be offered a loan on the strength of this.
3. Loan secured on car is “too complicated”
Some people are deterred from enquiring because they wrongly believe it’s complicated to apply for a logbook loan.
They fear there’s lots of red tape, or “small print” with hidden terms and conditions and pushy salespeople hassling you to sign up.
It’s a myth that applying for a logbook loan is difficult or will make you feel uncomfortable.
The truth is that applying is an extremely straightforward process, completing a simple online application and then speaking to an expert advisor to complete the transaction.
If your vehicle is eligible and you can afford to repay the loan, you’ll be guided through the application process every step of the way, with no hassle to sign up if you change your mind.
Nothing is hidden, including the repayment amount and interest rates. A potential borrower will be told upfront about the costs, with responsible lenders regulated by the FCA keeping the process transparent and simple.
4. Loan “takes ages” to come through
Vehicle owners fear the money could take weeks to appear in their bank, as indeed it might do if borrowing from a traditional lender, such as a bank.
It’s a complete myth that you’ll be kept waiting once approved for a logbook loan. On the contrary, you will receive your money on the same day.
The lender has nothing to gain by keeping a customer waiting for their money and it’s in everyone’s best interests that the loan is paid out as soon as possible.
The payment process is quick and simple, so far from waiting anxiously for days or weeks, the payment will be completed quickly.
There’s far too much misinformation about logbook loans, a valid way of borrowing money today. Rather than believing myths you’ve seen on social media, research the market independently and draw your own conclusions on whether it could be of use to you.
