Explaining what a logbook loan is and how it can offer financial assistance?

bulram | March 7, 2013

Logbook loan

A logbook loan is a short term loan that is secured against the value of a car. Logbook loans can be a good option for those who have bad credit. Traditionally it can be very hard to secure a loan through high street lenders such as banks who will normally demand that their clients have a good credit rating. A logbook loan is a finance option that does not normally require any credit checks which is why they are a good option for those who cannot borrow finance from traditional providers such as banks. Similar to how payday loans work, a logbook loan is a short term finance option and these types of loans should be borrowed with caution. For 1 to 3 months they can prove to be a good option for such unexpected emergencies. However failure to pay back these loans in the short term can lead to very high annual interest rates.

How a logbook loan works

A logbook loan is attained by a person putting up their vehicle as collateral to secure the loan. The log book loan company simply retains the vehicle registration certificate or logbook which gives them the ability to repossess the car should the loan not be paid back in full. This is a legal contract that is drawn up both parties prior to the loan being agreed and approved.

Key features of a logbook loan

The car being used as collateral must be registered to the person taking out the loan
The vehicle must be free of finance
In most circumstances, the person taking out the loan will have to be in employment so their ability to repay the loan back is proven.
The loan amount will be less than the value of the car

There is a lot of flexibility with a logbook loan meaning as repayment plans can normally be agreed to suit your needs. If you just need the loan for a month or two then the interest rates are reasonable. It is advisable to take out a logbook loan for no longer than 6 months as interest rates become much higher. Annual interest rates are still much lower than payday loans with a car loan having an APR of 400% compared to a payday loan where the APR can be as high as 4000%.

It is wise to read the terms and conditions before applying for a logbook loan and ensure that they are part of the consumer credit trade association. The rise in the popularity of short term loans is of no coincidence. More people have bad credit ratings due to the recession and it is much harder to get financial assistance from high street banks.

Author Bio
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