What is a Logbook Loan?

A logbook loan is a loan that you take, using a vehicle as collateral. The lender will take the logbook or ownership documents form you until the loan is repaid. If the loan is not repaid, then they will sell the vehicle.

This sounds rather harsh but it works in a similar way to a loan that you get when you buy a vehicle or a mortgage. If you cannot keep up the payments, then the lender will sell the item to get back the money that is owed.

A logbook loan can be for various amounts of money and the amount that you get leant will very much depend on the value of the vehicle. The lender will not want to pay you more than the vehicle is worth because they will not be able to get all of their money back if they are forced to sell the vehicle, if you cannot keep up the repayments.

This type of loan can be expensive and so it is wise to only use it for emergencies and pay it back as quickly as possible. It is often available to those people who do not have a good credit rating, which means that it can be an option for those who have poor credit ratings but own a vehicle.

The vehicle will need to be worth something and be in good condition to be considered to be collateral for the loan. It will also be necessary to provide proof of identity and ownership documents as well as evidence that you have an income and an MOT certificate. This will show the lender that you own the vehicle, have the means to pay back a loan and that the vehicle is road worthy and therefore worth something.

This type of loan is aimed at people who have poor credit ratings and so it is expensive because the lenders are taking a risk. Although they have the vehicle as collateral, they may not be able to sell it for the amount borrowed or even sell it at all and so the interest on the loan is high.

Julia Written by: