A logbook loan is something that some people are not familiar with. It is a short term loan, where you borrow money using a vehicle as collateral, usually your car.
The lender will need to look at your vehicle before you are given the loan. They will estimate the value and then deduct any other finance you have outstanding on it, such as a car loan and then will decide how much to lend you. It will not normally be the whole remaining value as they will want to be sure that if you have trouble paying it, they will be able to sell the car and get back what is owed.
The terms of the loan are pretty strict. You will be required to repay a certain amount each month as with any other loan but they will repossess the car if you miss a repayment. This means that you could be at risk of losing your car if you miss even one payment. Some companies may be more lenient than others and it is always worth finding out more about how strict they are likely to be before you take out the loan. Take a look at the terms and conditions but also talk to the company. Read reviews too, in order to find out what other people think of them.
The reason that the loans are called logbook loans is that some companies will make you give them the logbook to the car and so the effectively become the owners until the loan is paid and they return it to you. This gives the lender more control than they would with a traditional payday loan. This should help the vehicle owner to realise that they need to make sure that they pay the loan back when required or else they will lose their vehicle.
If you look online you will see many tales of people that have lost their cars due to having this sort of loan and getting behind with the payments. However, these sorts of stories are often highly publicised and you do not hear so much about those that used the loan successfully, paid it all back and were fine. You need to try to look at both sides to enable you to have a balanced view about whether it is the right sort of loan for you.
As with many short term loans, the amount lent on a logbook loan, will not be huge. However, the charges can be quite high and the consequences of not paying are also big. It is well worth thinking really hard before taking out a loan like this. You will need to think hard about whether you will be able to make all of the repayments and on time and whether you will be able to afford them each month and cover all of your other costs as well.
It is worth considering whether you are prepared to use your car as collateral. Imagine the situation where you do get it repossessed and the impact of that. It could mean that you are not able to go to work or see your friends and family. It all depends on how much you use and rely on your vehicle. If there are alternative ways to travel then you should be okay, but otherwise you may find that you will need to make sure that you do not lose the car or else you may need to give up your job or not see people and that could have a significant impact on your life. Therefore you will really need to think hard about whether getting the loan is the right thing for you and whether you can afford to take the risk.
When taking out the loan, it is easy to assume that you will be able to cover the repayments without any trouble. However, in reality this is often not the case. Make sure that you will have enough free each month to cover the repayment and then consider how you would manage if you had extra expenses that month or unexpected bills and how you would cope with that. Maybe you have savings you could fall back on, but if you do, you might be better using these now rather than taking out the loan in the first place, it would be a lot cheaper. If you are not sure that you would manage the repayments then avoid the loan as you could end up worse off than before.
The best customer for a logbook loan would be someone who does not rely on their vehicle and has no savings to cover the cost of what they need the loan for, but has a regular income with plenty left most months to cover the loan repayments. The problem is that most people would only need a loan because they did not have a high enough income to cover the bills and so repaying could be very difficult.