With banks and building societies increasingly tightening up their lending criteria, more and more people are struggling to get hold of cash to help them out of a short-term financial bind.
As a result, the market for alternative forms of credit is expanding rapidly and logbook loans in particular have become hugely popular in recent years.
With a logbook loan, the money you borrow is secured against the value of your car. Depending on how much your car is worth, you are able to borrow anything from a few hundred to tens of thousands of pounds. You keep hold of your car and are able to continue using it as normal, but the lender retains your spare key and registration certificate.
Logbook loans have a number of benefits over more traditional forms of finance. Firstly, lenders do not perform any credit checks, which mean this kind of loan is available to those with poor credit histories. Even if you have county court judgments in your name, you will still be eligible for a logbook loan just so long as you own a car.
The second advantage is the speed at which the money from a logbook loan can be with you. Some companies claim to be able to provide you with the cash within an hour and virtually all say you should have the money on the same day. This makes this type of loan ideal for dealing with an unexpected emergency.
Rather like payday loans or pawning your belongings, log book loans should only ever be seen as a short-term solution. Rates of interest can be high and the overall amount paid back can be significantly higher than the original sum borrowed, especially if the term of the loan is extended.
With some companies, paying back the loan early will incur a financial penalty. As with any business transaction, you should check the small print of your logbook loan carefully to make sure you are fully aware of all the fees and charges involved.
In the event that you fail to keep up with your repayments, the company can take possession of your vehicle and sell it at auction to recover the outstanding amount. Because of this, several stipulations will usually have to be adhered to during the term of the loan.
You car must always have a valid MOT and must be kept taxed and insured. The latter is particularly crucial. In the event of your car being stolen or involved in an accident, you would still be liable to repay the loan. Without a valid insurance policy, you would be unable to do so. Similarly, not having an MOT could affect the value of the car, lowering the level of security for the lender.
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