Logbook loans are a fairly new type of loan and so there may be those people that do not know what they are. It is worth knowing more about them so that if you are considering taking out a loan, you have a full understanding of the options available to you and which might be the best one for you.
The name logbook loan comes from the fact that when you take out this sort of loan with some lenders they will take your car logbook from you. Essentially this means that they have the ownership documents of the car and so they will own it until you repay the loan.
To start with the lender will take a look at your vehicle – normally a car but could be other types as well and calculate the value. They will then investigate whether you owe any other money on it – perhaps if you are still repaying a car loan from when you bought it. Then they will have an idea of how much value there is in it. They will then offer to lend you an amount of money that is a bit less than this.
The car or other vehicle is used as collateral on the loan. What this means is that if you cannot repay the loan they will sell the vehicle and get back the money that is owed that way. This means that although the debt will be paid off as well as any other money that is owed on the car; you will be left without a vehicle.
Many people find that it is the only way that they can get a loan which is affordable for them. The loan does not need a good credit rating as you are using the vehicle as collateral. It is easy to organise and means that the money is available pretty quickly. You will arrange regular repayments for the loan with the lender to make it as manageable as possible for you.
There is a risk with taking out a loan like this though. If you cannot manage the repayments your vehicle will be repossessed. This means that you could end up losing your vehicle and this could have a significant impact on your life. Consider what you use your vehicle or and whether it would be possible for you to manage well without it. If you use it to drive to work, for example and there is no alternative way of getting there, then it could mean that you will end up having to give up your job, if you do not manage to make the repayments on the loan. If you use the car to visit relatives, have trips out and things like that, you may have to stop doing these sorts of things. Once you get use dto having a car it can be very difficult to cope without one.
This means that it is extremely important to make sure that you are able to make the repayments. Make sure that you are aware of exactly how much you will need to pay and how often and you will be able to work out whether it is something that you can manage. You need to consider the amount of money you normally have available each month and how much you have left at the end and whether this will be enough to cover the cost of the loan. It is worth considering how you might manage should your income decreases or your expenses increase. The interest rates may go up and the loan repayments then become more expensive or other things that you regularly pay for or buy may become dearer and you will need to be able to manage. It is worth thinking through whether this could be a big problem for you and see whether you think that it is worth going ahead as you could risk losing your car. It could depend on what consequences there will be for you if you do use your car and this will depend on what you use the car for. Think about how important it is, who drives it and what it is used for to decide whether it could have a big impact on you if you lose it or whether it will not make a significant difference to you.