Borrowers with poor credit score face a monumental task of convincing banks and other financial institutions to approve their loan requests. Because of poor credit history, the banks view them as high-risk parties and prefer to decline their request for loans. One of the top options for people with poor credit score is a logbook loan. The lenders are only interested in the borrower’s repayment capability and do not factor the credit score. Though it might appear an easy line of credit, it comes with serious risks such as getting the car taken away, sinking deeper into financial woes, and high APR.
To keep these risks and dangers low, borrowers are encouraged to negotiate with the lenders when applying for the loans. In this post, we outline three items for negotiation to enjoy an easy repayment period and relationship with the lender.
Annual Percentage Rate (APR)
The amount you pay back after borrowing a logbook loan is determined by the annual percentage interest rate. Though many lenders have very high-interest rates that reach up to 400% APR, the borrower should not simply take what is written on the agreement. You should engage the lender and ask for a lower APR. Most of the lenders will be willing to lower the APR with a small margin. You can compare the lender’s rates with others in the market and showcase what you are willing to take. For example, if the lender has pegged his loan at 400% APR, indicate you are only willing to take it if he lowers the offer to 300% APR. Good lenders will not let you take the deal to another competitor.
Early repayment penalties
Unlike other types of loans where borrowers are encouraged to pay as fast as possible, many logbook loan dealers attach penalties for both late payments and early payments. However, why should you be penalized for early payment? This is one of the hidden penalties that many people rarely identify on the agreement sheet.
As a borrower, you should carefully read through the loan agreement to identify unnecessary penalties and insist on having them expunged. For example, if you decide to clear the loan early, the lender should only ask you to clear the total amount agreed at the beginning amount as opposed to attaching a penalty. Other penalties include late repayment with a day or two.
Loan flexibility and recollection procedures
Before signing the loan agreement from the selected logbook loan, it is important to look at the lender’s flexibility and recollection procedures closely. Here, you should negotiate to get greater flexibility and subtle recollection procedures. Insist that the lender allows you some flexibility for repayment in case you fall behind with one or two payments. For example, you can ask the logbook loan lender to leave room for renegotiation to make up for late payment without recovering the car immediately. You should also agree on the method of vehicle recovery in case you fall behind the agreed repayment schedule.
Do not simply take what is printed on the agreement, negotiate as much as possible for higher monetary value and smooth repayment period.