Most people in the US may have never heard of a logbook loan, because they are mainly common in the UK. A logbook loan is a loan in which a logbook or a registration form is used by motorists describing all the statistics and details of their automobiles which in turn is presented to the lending company. A logbook is usually in the registration of V5.
A V5 includes such statistics as the present registration marks, VIN number, engine number, chassis number the car model and insurance details as well as other personal details about the registered holder of the logbook. The validity period of a logbook holder is generally five years. When a person takes out this loan, they borrow against their vehicle, the lending company holds on to the motorist’s logbook until the loan is paid off.
Who can qualify for Logbook loans People facing bad credit, arrears, defaults, late payments, bankruptcy and arrears can apply for such loans by presenting their logbooks. They can be applied for at banks as well as other financial institutions. An individual can even apply for a loan online, which will be a lot faster.
So an auto owner can get a logbook loan simply by giving up their auto papers. This has been viewed as a viable alternative for those going through a desperate situation, such as those facing an extreme financial crisis and they have been turned down by other lending companies because of bad credit.
But not everyone agrees with the methods involved in obtaining a logbook loan. There are Log book loans complaints that in the UK some organisations and groups have taken initiatives to ban or outlaw. The practise of one’s offering up their car and signing over their V5 registration to the lender, who is in effect the temporary owner of the vehicle until the person pays in full is considered unethical.
Often, the interest rates are very high, some lenders charging more than 600% APR. If the owner of the auto do not pay on time, the lending company can take their car from them without any court order action. Further, it has been argued that it encourages borrowers to get into even further debt.
So the issues involved in banning the practise involves the lack of protection for borrowers if they fall into debt, unfair collection practises, the confusing nature of the language used in such agreements and the excessively high costs of the loans.