Just because you have bad credit and a string of county court judgements, IVA’s, or bankruptcies does not mean you cannot get a loan when you need one. Anyone over the age of eighteen, who has proof of their income and who is the legal owner of a car which is paid for in full, or almost paid for, can obtain a loan for around 75% of the value of the car in less than 24 hours. Not only that, the loan can be cash so you don’t even need the inconvenience of having a bank account, and lenders rarely bother with credit checks.
Loans secured against the value of your vehicle are known as log book loans, and can be issued for far more than just cars. If you have a caravan, a motorcycle, van or Winnebago, in fact anything which has a log book in your name and a V5 document, can be used to obtain a log book loan. Of course as the loan is secured your vehicle is at risk of repossession if you fail to make the payments. The logbook itself acts as collateral. Some log book lenders have branches which you can drive to, leave your log book, and drive off with a pile of cash.
Whilst this may sound like an excellent way for those with bad credit to secure a loan, it is in fact a terrible rip off, with exorbitant interest rates being levied against the loan. Each of the loan providers I looked at did advise borrowers to pay off their loans as quickly as possible to avoid paying excessive interest, but generally the loans are available between terms of one month up to 78 weeks.
The four main players in the log book loan game each charge a similar interest rate. These are Logbook Loans (APR 437.4%), V5 Logbook Loans (APR 439%) UK Logbook Loans (437.4%) and Mobile Money Log Book Loans which offers the bargain rate APR of only 378.3%.
A typical repayment schedule issued by Logbook Loans shows a loan of £1,500 can be repaid in one month for just £1845 in total. If the loan was issued over the full 78 weeks, which is the maximum term, the monthly repayments would be £232.08 per month. The total amount to be repaid over 78 weeks thus equates to £4180.86, meaning a massive £2,680.86 is paid in interest. Considering that to receive a loan of £1,500 in the first place the car must be valued at £2,000, the borrower would end up paying more than the full value of their vehicle in interest charges.
It is patently obvious that anyone who is desperate enough to take out one of these loans is financially inept and stands to have their car repossessed. The terms are nothing but usurious but no one is forcing anyone to take them out. The chances are that the lenders themselves may well be at risk of issuing finance on stolen cars and log books.