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If you have bad credit then it can be frustrating when you are turned down for a loan from a mainstream lender, such as a bank or building society.
You may also struggle to borrow what you need from licenced lenders that specialise in loans for bad credit. This is because they typically offer short-term loans for under £1000.
Logbook loans are also offered by licenced lenders. Yet they provide a way to access a loan using your vehicle as collateral.
It may be possible to borrow up to 70% of your vehicle’s value, even if you have a poor credit score or a chequered credit history.
First, though, you should consider whether you can risk losing your vehicle if you do not keep up with repayments. As well as if this type of borrowing is the right option for your current financial circumstances.
In this article Cashlady explains what bad credit means and suggests where to find logbook loans for bad credit.
What is bad credit?
Your credit file
When you apply for any form of credit, such as a loan, credit card, phone contract or mortgage, the lender will usually check your credit file.
Contrary to popular belief, there is no universal credit score. Each lender has their own criteria and will score you based on that. However, there are key features they look for to determine how well you have managed your credit in the past.
If you have good credit you are likely to be deemed low risk. Because you have typically managed your credit well and paid it back on time.
You may find you are accepted for credit more easily. And, that you are subject to better rates of interest. Simply because the lender is confident you will repay the money you borrow.
If you have bad credit then you may have failed to keep the terms of previous credit agreements and frequently didn’t make your repayments on time.
Paying your credit card bills late, exceeding your overdraft limit and defaulting on accounts all contribute to bad credit.
You may have been made bankrupt. Or, have a County Court Judgement (CCJ) or opted for an Individual Voluntary Arrangement (IVA,). All these sit on your credit file for around six years.
Not having any credit can also work against you because a lender likes to see evidence of regular repayments. So having no credit gives them no information to go on.
Loan providers also like to see evidence of stability. If you have changed address frequently, or aren’t registered on the electoral roll, your credit score may be negatively affected.
Learn more about bad credit
We have written a full series of articles on rebuilding your credit here. You should read this if you would like to learn more about what bad credit means. As well as how to access and understand your credit file and how to improve your credit score. You may also find loans useful in emergency situations.
Getting a logbook loan with bad credit
A logbook loan is a type of secured loan, meaning that it is secured against your vehicle (the asset.)
Many logbook loan providers do not perform a credit check or are willing to overlook bad credit. That is as long as you meet their eligibility criteria, are over 18 and can afford the loan repayments.
This type of lending is less risky for the loan provider. As, if you do not keep up with your repayments they can sell your vehicle to recoup their money.
It is, however, risky for you as you could lose your vehicle and would usually be expected to cover the cost of repossession.
The benefits of a logbook loan for bad credit
· Borrow up to 70% of your cars value, sometimes up to £50,000 depending on the lender and your personal circumstances
· Repayment period of up to 36 months
· Interest starts at 99.9%, which is much lower than many short term loans
· Borrowers with bad credit are frequently accepted
· The application is usually quick and straightforward
· Many logbook loan providers offer same day cash
The negatives of a logbook loan for bad credit
· You could lose your car if you do not keep up the repayments
· You may be subject to high-interest rates of up to 450%
· If you already have bad credit then taking on more credit could harm your finances even further
Where to find logbook loans for bad credit
Logbook loans for bad credit are available on the high street through stores such as cash converters and online.
There are dedicated lenders that specialise in logbook loans. Along with money lenders that offer logbook loans, and with other short-term loans.
Often you can apply for your loan online and complete the application process over the telephone. A representative from the loan provider with then arrange to meet you to check over your vehicle and complete the paperwork.
Do your research first
When selecting your loan provider, you should do your research first. We have written in detail about what to be aware of when signing up for a logbook book loan here, but to summarise:
Before agreeing to a loan we recommend that you check the details below:
• Read online reviews from people who have taken out logbook loans with the provider and be wary if there are many bad reviews.
• Confirm whether there is a fee for early repayment. Ideally, you would like the option to repay early without a penalty.
• Inquire about charges for contacting you. Many loan providers add on more fees for phoning you and sending letters when you are behind with repayments.
• Ensure that the loan provider is FCA regulated.
If you have bad credit or are struggling to manage your debt then some free and impartial advice is available. Contact the Citizens Advice and the Money Advice Service for help.