Are Logbook Loans a Blessing or a Curse?

Posted by juliabennet on September 24th, 2012

You may have heard of a logbook loan, but you possibly don’t know what this kind of loan is and how it functions? Logbook loans take your car as collateral and have high interest rates, but it allows you to borrow more money and quickly. Find out if this loan is right for you.

From the name, you can tell that this is a loan that takes your car’s logbook as collateral. This loan is different from payday loans since it requires your car as collateral. This means that your car is at stake if you cannot pay on time.

Payday loans typically lend out smaller sums of money - up to £1000 - to be repaid in a short period of time, typically a month at most. In contrast, logbook loans usually lend larger sums of money - based on the value of your car – and are payable over a longer period of time.

To apply for a logbook loan you are required to legally own the car. Some lenders may even consider other vehicles. This car needs to be younger than ten years old, have a current Mot if applicable, have insurance, and not be the collateral from any other financing ventures that include any other party.

To obtain a logbook loan, you must be above eighteen years of age and have proof of your identity.  Most lenders do not do a credit check, but some may. The amount you may borrow from a logbook loan is most dependent on how much your car is worth. As a general rule, the amount you may borrow is about half the value of your car. Until your debt is repaid, the lender will retain the V5 logbook, and occasionally, they will put a tracking device on it. Lenders will also use a credit checking service.

To start applying for a logbook loan, you should go online. The lender will need to see the requisite paperwork and the car, and this can be done at a predetermined place and time.

Compared to a regular loan, the interest on logbook loans may seem higher, but logbook lenders give lending services to people who cannot borrow from other places or people who need money faster. If you think the interest rates are too high on logbook loans, then you should find another type of loan instead.

All lenders have their own terms of agreement for their loans, and it is your own responsibility to make sure that you understand the terms before entering your contract. Failing to pay on time means that your car will be repossessed and your interest rate may sky-rocket.

If this seems scary, just remember that taking out this type of loan means agreeing to pay on time or face harsh penalties. Just remember to be responsible and pay promptly.

Choosing a Loan requires great responsibility and an Logbook loan experts advice is essential.