What Is a Logbook Loan and How Do They Work?

A Logbook Loan or a v5 loan as they are also known as is a term used in Great Britain for a loan from a lending institution where the title or vehicle registration certificate, to a vehicle (logbook) is used as security for the loan.

The way these type of loans works is that the lender can take possession of your vehicle at any time after a missed payment without having to go through the courts system. This is different than is other countries where you can still use the car as collateral but the lender has to go through the courts to take possession of the vehicle, this is call a Title Loan.

A couple of the advantages to this type of loan is that the loan can be approved in a very short time,and no credit checks are carried out as long as the debtor has proof of income that is steady, the vehicle has enough value to act as security and the vehicle is under ten years old and is free or almost clear of finance then the loan can go though in less than thirty minutes. The lender will normally give you the money via a cheque or the money will be paid direct in to your bank account.

There are some concerns over these types of loans as they can have very high interest rates and some people have argued that the terms are not always fair. For those with poor credit ratings however it can be a way to improve your rating, as long as you make your payments and since the lender is one who reports to the credit rating facilitators, then your credit rating will be improved and perhaps the next time you need a loan you can get a different type of loan.

If you default on the loan, not only will you lose the vehicle but your credit rating will become even worse. A Logbook Loan can be an alternative to other high risk loans and you don't need to have a co-signature on the application for the loan, however because of the high interest rates they should be avoided if at all possible. A logbook loan should only really be used as a last resort or be used in a emergency. And if you do decide to take out a log book loan make sure you can afford the weekly repayments or you will risk losing your vehicle.

Kevin Walker is an expert in money saving tips. kevin is the owner of mymoneycredit.com which compares pay day loans and other lending sources

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