What Makes a Logbook Loan More Suitable Than a Payday Loan?

With the recent economic turmoil in the world, it’s little surprise that many people are struggling to find ways to get cash-in-hand quickly. For this, short-term loans have often fitted the bill perfectly.

But as many banks have also been hit by the recession, they are increasingly wary of lending to consumers. As a result individuals are forced to seek alternative means for a cash loan.

A market that cropped up to meet this need was the payday loan scheme. However, those that examine the terms and conditions of such loans carefully may in fact notice that a logbook loan is more suited to their needs, and comes with lower risks than a payday loan.

What is a Logbook Loan?

A logbook loan is a loan granted against your vehicle’s V5 document or “Logbook”. It is an easy method of loan as they do not check credit history. It is generally approved within a day and requires very less paperwork. Though it has a requirement, ie. the vehicle should be finance free and should not be more than 12 -13 years old. Still, it is considered as a better alternative to Payday Loans because of low interest rates and flexible repayment options.

Here’s a few reasons that a logbook loan may be the more suitable option:

1. Interest rates are significantly reduced.

Although payday loans may seem a quick-fix for cash in hand loan, many individuals fail to consider the high interest rates that such loans come with.

Payday loans can sometimes come with APRs topping 4,000%, leaving borrowers paying back a substantially larger sum than they originally borrowed. It does little to help your cash flow stabilize, which is what loans are intended to do! If you don’t repay it quickly, you may find yourself facing a potentially debilitating debt.

Logbook loans however, are secured against the worth of the borrower’s car, which generally means that the APRs are far less, meaning it’s a more manageable debt and easier to pay back.

2. Potential for larger sums in loans

While payday loans may hold an appeal in that they require virtually no collateral, leaving it as a no-strings attached type loan, if you already own a vehicle you have a high-value asset in your possession. This asset can be used to help obtain a logbook loan, which then in turn gives you access to a greater potential sum to loan.

Although it depends on the value of your vehicle, logbook lenders may offer loans ranging from £200 up to £25,000. It doesn’t matter if you are considered to be self-employed, or if you have a less than stellar credit record. Your car is generally the second most valuable asset you would own, and you can make that asset work harder for you in securing a log book loan.

3. Loan periods are more easily managed

Payday loans are designed to be a quick-fix, that is a short-term solution. What that means, is you’ll have to repay the loan within a relatively short period of time. If the borrower cannot secure the funds to repay the loan, the interest quickly builds up. This leaves borrowers at times forced to take out a second loan merely to repay the first loan!

Lenders offering logbook loans however, can set it up so that you can repay the debt over a far greater time period, anywhere from half a year up to three. In addition, borrowers can sort out a repayment plan to match their cash-flow needs, which guarantees you can pay back your debt in a timely and stress free fashion.

What Loan Products Are Available Today?

Ever since the introduction of the internet, the loan market has changed dramatically. The internet has meant the lenders are able to offer quick decisions and same day payouts, something that was simply not possible before. It has also meant the lenders are able to contact applicants and existing customers with ease via things like text, email and instant web-chat facilities.

Nowadays, there is a loan product available to suit almost any financial situation. Whether you’re looking for; £10,000 to buy a new car, £5,000 with bad credit or £200 to tide you over until your payday- there is a lender somewhere that should be able to help. Here are just some of the options available:

Secured Loans
Secured loan lenders will be able to offer anything from £2000 to £50,000 (with some offering up to £100,000) to homeowners. The reason secured loan lenders require the applicant to be a homeowner is because they will secure the loan against the borrower’s property. This means that if the borrower was unable to pay and the loan falls into default; the lender has the right to repossess or put a charge on the property.

Personal Loans
Sometimes referred to as unsecured loans; these loans work on the basis that the lender has not got the security of an asset such as a property to fall back on. This means that if the loan was to fall into default the lender is unable to repossess the property, although if taken to court they may be able to get a charge put on a property of the borrower is a homeowner. The regular personal loan provider will offer between £1,000 and £15,000 depending on the applicant’s credit history.

Peer-to-Peer Lending
Often referred to as social lending, this is a relatively modern approach to finance. It uses the idea of a borrower getting financed by investors who are funding all the lending. The investor then makes a margin depending on the interest rate the borrower is being charged. The “lender” in this situation is more like a middleman, taking a percentage of the interest charged.

Guarantor Loans
A guarantor loan is a personal (or unsecured) loan that is backed by a friend or family member with good credit. This means that in a lot of cases the main applicant of a guarantor loan can have a certain degree of poor credit and still be approved for the finance. This works because the lender has a “plan B” and if the applicant is unable to pay they have the right to ask the guarantor for the payment instead. The guarantor is legally obliged to make the payment if the applicant can’t.

Logbook Loans
Logbook loans are secured against a car. They work in a similar way to secured loans. The amount available to the borrower is relative to the value of the car the loan is being secured on. If the loan goes unpaid the lender will repossess the car.

Payday Loans
Payday loans are short term loans, usually lasting no longer than a month. The idea of them is to free up the money you need now and pay it back as soon as you receive your wages. An example of when you would take out a payday loan would be if you are struggling to pay an important bill mid-month, perhaps Council Tax, you know you could pay it after payday but they are demanding the payment now. In this situation you could borrow the required funds, say £100, and then 2 weeks later after being paid you would repay the £100 + £25 interest.