Logbook loans are relatively new types of loans and you may not really know exactly what they are. All lenders will run their loans slightly differently but it is worth knowing a bit about how they work in general so that you can understand whether it is a type of loan that you should be considering.
About Logbook Loans
So a logbook loan can be taken out using a vehicle as collateral. This means that the lender will look at your vehicle and value it and give you a loan based on a percentage of the value minus any other loans you have on it. So if they value it at £2,000 and you have a £1,000 loan on it they will give you a loan based on the £1,000 left. They would be unlikely to give you the full £1,000 but a percentage eon it, depending on how much they decide to lend. You will then effectively sign the car over too them and if you miss a repayment on the loan they can take the car, sell it and use the proceeds to repay back the loan and give you the remaining money to pay back any other loans you have on it.
It can be a useful loan for those that have a poor credit record. This is because they are unlikely to be able to get a standard loan and by using a vehicle as collateral there is less risk to the lender. This means that this type of loan could be a cheaper alternative to a payday loan. It si worth checking though as loan rates do vary a lot.
Things to Consider
As with all loans there is a risk with this one. You will need to be really confident that you will be able to make all of the repayments or else you can risk using your vehicle. This can have a huge impact on you if you need your vehicle for work, for example as it could mean the end of your income source. Therefore you will need to think really carefully about whether you are confident that you will be able to make the repayments or not, especially if the vehicle is really important to you. It may be that you feel that you could cope without it and are therefore prepared to take the risk and go for the loan even if you are not confident that you can make the repayments. However, it can be hard to imagine how hard it can be to cope without a vehicle once you are used to having one.
Is it for you?
So you will obviously need to think hard about whether a logbook loan is the right type of loan for you. You will need a vehicle that has enough value in it to allow you to borrow what you need. If not, you might be better with an online payday loan or similar. Then you need to be confident that you will be able to cover all of the repayments. You will also need to think about how important your vehicle is. How will you manage without it and are your prepared to risk losing it. Even if you are confident that you can manage the repayments there is always a risk that you will not. Do you have a backup plan if this happens? Is there someone that might be able to help you out or do you have a bit of money tucked away that you can use?
As with all loans, it is sensible to think about whether you really need the money. Consider what you are using it for and whether it really is necessary for you to have it. Then think about the repayments and whether you can afford them. Look at your past bank statements and see if you would normally have enough money to cover the cost of the repayments. If you do not is there a way that you can cut back and budget to make sure that you will. Also consider whether you think that you will manage to stick to a budget if you set one.
If you do decide to go with the loan then you need to be sure that you research it well. Make sure that you compare the costs and different features of the various logbook loans that are available to you. You want to make sure that you are paying the least possible amount for the loan and that you are getting good value for money as well. It will take time to do all of this decision making, both as to whether the loan is the right type, whether it is right for you and if it offers good value for money. However, it can be well worth thinking hard as there is a lot at stake and you do not want to take unnecessary risk or pay more then you need to for it.