Logbook loans are looking like the new, fast way to secure money; but like all forms of credit, they deserve close scrutiny before leaping in.
So what are they? In simple terms, a logbook loan is a cash amount secured against your car.
And of course – there is a catch…
Logbook loans are generally speaking a risky strategy because you are signing your V5 logbook over to the lending company. This means they own your car and will allow you the use of it until the loan is repaid.
If you fail to repay the loan, you could lose your car.
And the interest rates for logbook loans are astronomical. 400% interest or higher is not unusual. This could mean a loan of £1,300 repaid over 24months would see you hand over more than £4,419 in total. Therefore, your interest on a £1,300 loan would be a whopping £3,119 – almost 2½ times the amount you borrowed!
If that isn’t enough to make an eager borrower reconsider, most logbook loans will only lend up to half of the value of the vehicle and your cash will arrive in the form of a cheque which takes several days to clear.
Or for those companies offering quick cash on a logbook loan, you will pay an even higher interest rate.
So although it may appear to some as a route to solve short-term cash problems, there are many better alternatives to deal with such a financial crisis which won’t necessarily put your car at risk.
So if you are considering a logbook loan or other high-interest credit ‘solutions’ it’s important that you first seek advice from an insolvency specialist before you buckle in to a crippling debt! We can advise you on how to defer debt, manage cash-flow problems and work through lean times to achieve greater financial stability.