In recent years the recession, together with the Credit Crunch, has made it difficult for many people to obtain credit. Financial companies have been much stricter about their lending terms and anyone unfortunate enough to have a poor credit rating is very likely going to be refused any application for a loan. One solution that is becoming more widespread is the logbook loan.
What is a logbook loan? This is a loan that is secured against your vehicle. All companies have different lending policies, but in general you must be over 18 years of age, have a legal vehicle logbook, also called a V5 document, and your vehicle must be free or nearly free of any finance agreements.
What are the disadvantages of logbook loans? These are a type of secured loan which use your vehicle for security. As with any other type of secured loan, if the regular monthly payments are not maintained then the security is forfeit - in this case, you would lose the vehicle. The monthly interest payments are usually substantially higher than you would expect if you were securing the loan by other means, for instance, against your house.
What are the advantages of logbook loans? People who apply for these loans tend to have poor credit ratings as they may find it more difficult to obtain money from a regular bank. The problem here is that they may enter into some finance agreements such as payday loans, which can spiral out of control. When they fail to meet the payments, the high interest rates are compounded and the value of the debt starts to escalate. With a logbook loan, the downside is limited to the value of the vehicle. There are also no credit checks as the loan is secured so this generally means that the cash needed is advanced within a few days.
What can logbook loans be used for? They can be used for just about any purpose. Many people use them for a very short term loan to pay for a holiday or maybe a special occasion of some sort. The money can be used for a business opportunity or for improvements around the home - there are no real restrictions about how it may be used. But this does mean the borrower needs to be aware of the possible downside if they fail to meet the monthly repayments. It would be wise to compare several companies and find out which one offers the most practical solution.
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