A logbook loan is lending alternative when the amount the person borrows is secured against the vehicle. In order apply for this kind of loan the person has to be older than 18 years old, have legal vehicle document and own a car or another type of vehicle that is free or almost free from financial liabilities. As logbook loans are becoming more and more popular it is important to know about the upsides and downsides of this type of borrowing. Therefore, the most important advantages and disadvantages are provided below with detailed explanations.
Logbook loans are a great solution for people that have poor credit rating and are not able to get the loan from the bank or another regular credit institution. This became especially important after the recession and credit crunch that was conditioned by the crisis. Logbook lending companies provide an opportunity to borrow even for those people that have bad credit history because the vehicle serves as a collateral for the loan.
Secondly, since the loan is secured against a vehicle no credit checks are needed and people can get the loan very quickly. Usually it takes less than 24 hours whereas the process of checking the credit history of the person when a regular loan is requested can be much longer. In order to get the logbook loan the person simply has to fill in the application created by the logbook lender. These applications can be found online. Usually the person has to provide the logbook lender with his name, age, address, employment details, monthly income and the details about the car. After the application is submitted via Internet, the person simply has to wait for the logbook lender to contact him. The personnel of the logbook company will review the application and contact the person if they need any clarifications or further explanations. After that the meeting is arranged and after the person surrenders his logbook the money is borrowed. The process is really very quick.
Another advantage that people can have when they decide to take out a logbook loan is that there is not risk to loose valuable and essential property, such as a house. Imagine that You desperately need £5000. It is obvious that You would rather risk loosing your car than Your property for such a small amount of loan.
What is more, the person can still use his vehicle. Although the logbook document is surrendered to the logbook lender, the borrower remains the legal owner of the car. He only has one obligation: to maintain the car in its good condition. If the condition suddenly becomes worse, the market value of the car drops sharply and the car can no longer serve as a reliable collateral for the lender.
Last but not least advantage is that the money from logbook loans can be used for almost any purpose. There is no restriction that other credit institution like banks imply. It is the complete responsibility of the person where to put the money: invest into a new business, pay for the medicine or go to the casino. Only one thing is important: this money will have to be returned. As a result, it is advisable to use the loan wisely and only for necessary things.
Logbook loans have several serious disadvantages that potential borrowers should be aware about. First of all, annual percentage rate (that can also be called APR) is very high and in most case can be higher that 400%. Some people can find it difficult to meet monthly payments of the logbook loan. As a result, when the payments are not made on time, logbook loan company can repossesses the vehicle permanently. Such an action can have an adverse influence on the person that is borrowing.
Secondly, it can be very difficult to quantify the integrity of logbook lending companies. The integrity criteria sometimes can be less important that price criteria. This means that people often choose those logbook lenders that offer lower APR even though these companies can look unreliable. When people default on their loans, these companies can often use very intimidating methods to collect the cars and this can be a very frightening experience for people that already suffer from financial problems.
Last but not least, the maximum amount of the loan is limited by the value of the vehicle. Applicant for a logbook loan has to know that the amount of the loan is closely related to the market value of the car. Logbook lenders evaluate the car themselves or ask other companies to do this for them. The model ad condition of the car is taken into consideration when the evaluation process is carried out. Generally, a person that is applying for a logbook loan can expect to borrow from £500 to £50,000. This is important in order to prevent the loan from escalating out of control and creating unbearable financial burden to the borrower. However, the limitation also restrains some people from taking out a loan that is sufficient enough to cover financial needs of the person.