A logbook loan is a loan that comes with both pros and cons. This article is a brief overview of what they entail and some of the positives and downsides to one.
What They Are
Logbook loans are loans are secured loans that rely upon the worth of something that you already own to secure them. In most cases this is a car, but motorcycles, boats, and other modes of transportation with titles can be used as well. The title or logbook is held by the lender until the loan has been paid off.
The secured loan style means that people with a lot credit history or who has bad debts in the past can get a loan. This makes it a much easier loan to get and often means that the interest rate will be much lower. Often the loans can be done for a much smaller amount as well, making them more flexible than other types.
Should you default, you will lose your vehicle. There is no need for a court order to seize the vehicle, and by law the lender can sell off the vehicle as soon as they take possession of the vehicle. In addition, the amount of the loan isn’t always based on the value of the car, meaning that you could lose your vehicle for an amount worth less than the car itself.
For some, the downsides might outweigh the positives, but it’s best to meet with a loan professional to really ascertain whether or not a logbook loan is right for you.