09:48 01 November 2013
If your credit history or financial situation doesn't allow you to get a normal loan from high-street creditors, then you may need to take out a logbook loan. These loans require that you put a vehicle (any type of vehicle from normal cars to trucks or motorcycles) as collateral, so the creditor can have a guarantee that you will repay your loan on time.
The risks of logbook loans
You can access funds between £500 to £50,000 with logbook loans, but the interest and additional fees are higher than with regular loans. There are also several risks involved, one of the most important one being that your vehicle will be owned by the lender for the whole duration of this loan. This means that you'll be able to use your car just like before, but in the event that you can't repay the loan on time, the lender can choose to sell your car to recover the money.
If you can't repay the total amount you borrowed, your credit score will decrease and you may be charged extra fees and interest in exchange for extending the payment period. This can make it really difficult for you, so you should only consider logbook loans if you know exactly that you can repay the loan on time.
Finding the best logbook loan
First of all, your vehicle's market value determines how much you can borrow with a logbook loan, so make sure you know exactly what your vehicle is worth. Generally, logbook lenders will borrow up to 50% of your vehicle's value. Secondly, make sure you take the time to compare the numerous logbook loans available on the market and see which one has the lowest fees and interest rates. Remember that logbook loans are very expensive, so only take them if it's absolutely necessary.
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