As the name suggests a logbook loan is a loan secured against your vehicle and having a logbook loan on your car means that you run the risk of losing it if you default on the repayments to the loan company.

Logbook loans owe their popularity to the fact that they are quick to access as they are issued with no credit check. To avail of a logbook loan, all one usually needs is a car of sufficient value. Oftentimes even those who are considering starting an IVA are inclined to approach a logbook lender in order to meet urgent money requirements like debt repayments without taking recourse to an IVA.

Let’s get the fact straight. For all its ease and speed of access, logbook loans are an expensive form of credit with APR’s often upwards of 250%. If you are currently considering taking a logbook loan you are likely having existing loans and credit card dues which are beyond your current means to repay. While a logbook loan may look tempting you should be sure that you can make the repayments in time and close the loan in the timeframe agreed with the lender. You should bear in mind that missing payments will lead to additional costs being added to your account and the debts quickly increasing leading to a situation where you could have your vehicle repossessed. So first and foremost borrow only the bare minimum when taking out a logbook loan.

If you are short of funds to repay your existing debts and are considering taking out a logbook loan, an IVA may be a better option. What’s more, if you have already taken out a logbook loan you can still enter into an IVA. Also, if your car has already been repossessed for defaulting on your logbook loan repayments and there is a shortfall debt on the loan this debt can be included in your IVA.

So, when is a logbook loan a good idea? It is when you are certain you can afford the instalments, absolutely sure that there are no cheaper sources of credit available to you in your current situation and you cannot do without the money you are looking for under any circumstances. And if you are struggling with mounting debts already and are looking for money just to repay them you should consider an IVA instead. For, in such situations, a logbook loan can only bring you temporary relief.

To sum up, while considering a logbook loan, be sure that your situation rules out an IVA. And be prudent in managing your finances. There are thousands who have used logbook loans to meet their urgent money needs and reconstructed their finances.

Logbook loans and their advantages

Logbook loans are secured against the vehicle document or car logbook. The borrower can avail up to about 1,000,000 dollars as loan and the time of repayment is longer. In order to obtain a loan, the borrower must be at least 18 years, have a decent income source and own a finance-free car. The process of application is completed within two business days. The lender provide loan after determining the value of the car. The borrower has to provide his income proof, sign some documents, leave his car logbook with the lender and get the loan amount.

Disadvantages of logbook loans

However, if the borrower fails to pay the loan, the lender can sell the car and settle his loan against the sale proceeds. Moreover, if you need money the same day, you may not opt for these loans because the process of application and lending usually takes two to three days.

Payday loans and their benefits

Payday loans are a short-term loan facility which is useful in solving small and urgent financial obligations that come up between two paychecks. These are unsecured loans and the amount of loan ranges between 100 dollars to 3,000 dollars. Any person, who is above 18 years of age, has a gainful employment and a checking account can apply for a payday loan. The process of application is quite simple and quick. If the application is approved, money is quickly transferred in the checking account of the borrower within couple of hours through wire transfer. The borrower is required to repay the loan on his next payday.

Drawbacks of payday loans

However, the rate of interest is very high ranging from 20 percent to 40 percent per month. Moreover, a borrower has to bear late payment charges and other fees.

Comparison of logbook loans and payday loans

Payday loans are relevant for small short term emergency expenses between two paydays while logbook loans are perfect for big purchases and major expenses. The time of repayment of logbook loans is much longer compared to payday loans where a borrower has to repay the loan on his coming payday. Similarly, payday loans are quite costly in terms of interest. Logbook loans are secured; lenders don’t check the credit ratings of borrowers. On the other hand, payday loans are unsecured and the borrower’s credit history is checked while lending money.

Both these loan facilities offer certain benefits and have their own drawbacks. Payday loans are ideal for meeting short term financial expenses which are unavoidable and has to be met the same day. Logbook loans are suitable for major expenses requiring huge amount. However, logbook loans turn out to be a better choice for most of the circumstances in terms of interest and repayment.

Looking at it that way, logbook loans are fairly simple to understand. However, there are still complaints and problems with logbook loans, both from the side of the lender as well as from the side of the customer. Many of these problems aren’t unique to this form of loan, but there are still cautions that need to be taken.

For instance, logbook loans can be used to pay for nearly anything. Whether you need to repair your home, or you’re scraping up money for plastic surgery, one of these loans will more than suffice your purposes. Because of this width of field the lender should be concerned with what the borrower needs the money for. Unlike a more standard bank loan though, logbook loans are made fairly quickly, and the amounts can reach up to 50,000 pounds depending on the make of the borrower’s vehicle. That’s a lot of money to let walk out the door if the person is using it for something non-essential. Then again, this could be said about any type of loan.

Logbook loans, as mentioned, are determined based on the value of the borrower’s car. For the lender this provides a bit of security, and it lets them rest easier knowing that even if the person that borrowed money defaults, the lender still has something that can be used to pay back the loan. For the borrower though, logbook loans may not be the solution that they’re talked up to be. For instance, say you need money to fix your home, but you drive something older and of middling value. You can get money this way, but it may not be enough. Worse, if you accept this loan and then have to get another (bad practice in general) then you’ll have several debts to pay back rather than the one.

When used properly as a financial tool, logbook loans can turn your car into a thing of value that helps you get the money you need on time and quickly. However, logbook loans are typically aimed at those with lower to bad credit, which begs the question of just how wise a lending institution is to give large amounts of money to those that have been irresponsible in the past, or who have made very poor financial decisions. On the other hand, these loans are a much better tool for the lender, since logbook loans do provide an “if all else fails” route, just in case the loan never gets repaid.