What to consider before getting a logbook loan

Logbook loans are designed for borrowers who own a car with immediate need, and no resources to satisfy it.  Also called a V5 loan, it uses the car’s V5 document as collateral in the duration of the loan. But what sets it apart from other types of lending policies is that the borrower can keep his car so long as repayments are made timely.

Because logbook loans use car as the collateral, it is important to decide carefully if this is the right loan for you. With the ease of getting the cash in as little as 24 hours, it comes with responsibilities and risks that the borrower needs to be aware of. Here are some of the considerations you need to first ask yourself before getting a logbook loan.

What is the money for?

An advantage of logbook loans is that it does not ask what the loan is for. Therefore, it is your responsibility as a borrower to make sure that the money will be put to good use. Whether it is to pay hospitalization expenses, car repairs, or even pay off other debt, make sure that it is a strong enough reason for you to put your car at the risk of repossession.

How much money do you make?

Another advantage of logbook loans is that the borrower can decide the terms of repayment that is convenient and affordable for him. Therefore, when planning to get a logbook loan, try to incorporate how much repayment you can shell out off your earnings. If you are comfortable with the amount left with you such that it does not push you to incur more debt through credit cards and personal loans, then make sure to stick with it.

How much is the vehicle worth?

The amount you can get from a logbook loan depends on the value of the vehicle. There are lending companies that can offer as much as 50% of the vehicle’s value to the borrower. Therefore, consider your needs and your vehicle’s worth – will it cover your expenses? Make this consideration very carefully as it can lead the borrower to making multiple loans when the money is not enough to cover what they need.

Are you ready to commit to this?

A logbook loan is more than you, as a borrower getting the cash you need and using it for your expenses. It is a commitment to stick to an agreement you made with the lending company – to pay back your debt as agreed. Furthermore, it is a commitment to yourself to make more informed financial decisions to help you pay back, but also to avoid the pitfalls that led you to borrowing the money in the first place.