Being as loans involve lending out money to those that need access to it, those that are actually lending the money out need some kind of assurance that they will see their money paid back at some point.
This is why so many lending companies require that you send appropriate documents to verify that you can be trusted with a specific loan and that you can be trusted to pay the value back with interest. Most loans simply involve a quick credit check as well as proof of employment to do the job, but for some lenders, this is not enough.
If a person is claiming a loan of a much higher value, then they may need to provide the lender with something extra to be in with a chance of successfully getting a loan. One such loan that famously requires more than jsut official documents is a logbook loan.
But what is a logbook loan? What does the term actually refer to? And how do you get a logbook loan? If any number of these questions regularly cycle through your mind, then read on down below to get some answers!
What Are Logbook Loans?
Logbook loans are a type of loan that makes use of an individual’s car as a form of ‘Security’. Within the realm of loans, the term ‘Security’ refers to an asset that the individual claiming the loan puts forward to act as collateral should the loan not be paid back. For example, you may have heard of people putting forward assets like homes as a form of security for a loan.
Logbook loans, specifically, make use of cars as the main form of security. If the individual claiming the loan were to not pay back their debts within good time, then the lender reserves the right to claim full ownership of the car, free to sell onward.
This rather extreme form of security helps to drive confidence for the lender, as, if the claimant is willing to use their car as security while claiming the loan, it is likely that they are confident enough that they can pay the loan back. If the claimant does not pay back within due time, then the lender can rest assured that they can use the car as collateral.
Who Owns A Car Over The Course Of A Logbook Loan?
If an individual were to go through with a logbook loan, then the car that they use as security will officially belong to the lender.
This gives the person receiving the loan an incentive to repay the loan as soon as they possibly can, to regain ownership of their car. If the loan payment is not completed in time, then the lender reserves the right to do whatever they wish with the car.
Over the course of the logbook loan’s duration, the individual claiming the loan can still use and drive the car as normal, but it does not officially belong to them over that period of time.
Is It Easy To Get A Logbook Loan?
Logbook loans have often been turned to by individuals that have previously been rejected from receiving loans before. The reason why lenders are more willing to enter logbook loan agreements is that they can be sure that they will receive their money back in some form or another.
Either the person borrowing the money will pay the debt back within good time, or the lender can simply use the car as collateral by selling it off. Before the loan is even agreed upon by the lender, the lender will seek to verify that the car is equal in value or exceeds the value of the money that is being loaned.
This helps them to be sure that they will receive their money back in some form or another.
How Much Are Logbook Loans Worth?
Logbook loans can vary massively in worth unlike some other types of loans that often have very fixed values. The value of the loan is often dependent on the value of the car. If you were to use a more expensive car as a security, then you may be able to claim a much higher loan amount.
This can make logbook loans a great option for those that need a very specific amount of money from a loan, and this is also helped by how easy it is to apply for a logbook loan.
Are Logbook Loans Safe?
Provided you only enter into a logbook loan with a lender that is represented by the FCA, then you should be totally fine.
However, you should make sure that you can definitely pay back the loan that you are going for, as you are at strong risk of losing your car, as the lender has nothing to lose if you were to not pay back the loan in time.
You may also want to keep in mind that logbook loans can often have very high interest rates which can make them difficult to pay back quickly.
You should make sure that you can afford the risk of a logbook loan before entering one.
To Wrap Up
Logbook loans are a form of loan that allows the claimant to submit their own car as a form of security, which allows the lender to confidently approve a specific loan knowing that the car will act as collateral if the loan is not paid back sufficiently.
Logbook loans are easy to enter, but if not careful, they can be easy to escape from, so make sure to carefully consider them before entering one.
Frequently Asked Questions
What Is A Logbook Loan Used For?
Logbook loans are used to act as an easier way to get a loan, by using a car as a form of security.
Do logbook Loans Do Credit Checks?
Logbook loans, usually, do not require any extra credit checks, as they are secured against your vehicle.
How Much Can I Borrow Against My Car?
Generally, logbook loans allow you to borrow an amount of money that is close to the general value of your car.