That every economic boom is followed by a period of tepid or even negative growth is well-known. In the history of our economy, the latest downturn that started in 2008 and still playing itself out, has been particularly bad. The period has been marked by elevated levels of joblessness and decrease in incomes. Credit has been hard to come by and this has had a snowballing effect on jobs and incomes. At the retail level, while interest rates have remained stagnant, mainstream lenders do not entertain those with a less than stellar credit history.
For individuals hit hard by the economic downturn, this has been a double whammy. On the one hand, they either have lost their jobs or have a job that doesn’t help them make both ends meet, on the other, they find it hard to meet their urgent money needs. This situation is apt to drive them to despair. It is in this situation that alternate lending instruments like log book loans and pay day loans have gained popularity. While alternate lenders are accused of charging extortionate rates of interest, it may also be acknowledged that the majority of borrowers stick to their repayment schedule and end up a happy lot. Problems do arise when borrowers default or delay their repayment.
As most of you are aware, log book loans are pretty easy to get if you own a car that is less than ten years old and is free of any encumbrance. When you apply online through a site like ours, the loan can hit your bank account in as little as 24 hours. Your credit history is not a consideration when the loan is processed. Instead, the factors considered are your car’s market value and your financial profile. The size of the loan that is issued to you is based on what is considered an affordable repayment amount on the basis of your profile.
There are a few things that borrowers should be aware of in the context of a log book loan. First and foremost, the rate of interest is high though not as high as payday loans. Why are the rates so high, you may wonder? It is because, log book lenders operate in a high risk market comprising customers with poor credit history. Their operational costs are much higher than mainstream lenders. The rate of interest reflects this high risk.
Secondly, when you sign up for a log book loan, you are leaving your car’s V5 document for the lender to keep as a security. At the time of signing up, you are given a repayment schedule which you are advised to check and ensure that suits you. You will be better served to opt for a schedule that allows you to repay the loan in the shortest possible time, given your financial situation. This way your interest outgo will be minimum.
If you are disciplined in your repayment, there is no reason why a log book loan should cause you issues. In fact, a great majority of borrowers stick to their repayment schedule and see log book loans as a quick and dependable source of money at times of urgent need.
Logbook loans and payday loans both help you meet urgent money needs. Which of these will you be better off going for? We find out in this article.
With the economic downturn comes all types of lending restrictions and those with poor credit are the worst affected as they are left with few options to borrow money. As a result, many people are refused loans, credit cards, overdrafts and even mobile phone contracts.
Banks use credit reports to assess the creditworthiness of a potential borrower and based on this decide for or against lending to them. The lower your credit rating, the bigger risk you are assumed to be and the lower your chances are to be offered credit.
Come alternative lenders
The situation has led to an increase in the number of ‘alternative lenders’ offering loans to people with poor credit score. Two of the most popular products in this category are logbook loans and payday loans. As applicants are not subject to a credit check and almost anyone is guaranteed of being approved for a loan, these loans have risen in popularity. Also, because most lenders of logbook loans and payday loans operate online, money usually reaches the borrower within hours of the loan being approved; this is especially true of payday loans.
Although these loans have very prohibitive interest rates the fact that they are available to almost everyone in a credit-starved market has led to payday and logbook loans becoming very popular. These loans are definitely a relief for people with poor credit and in urgent need of money.
Merits and demerits
Now, if you are looking for an alternative loan, should you opt for a payday loan or a logbook loan?
Payday and logbook loans are much like any other loan product in that they all have their positives and negatives. It is always best to clearly understand what you are getting into before committing to any type of credit, be it a personal loan, secured loan, mortgage or credit card. The same applies to payday loans and logbook loans too, perhaps more than the regular credit products.
Apart from their availability to those with damaged credit history, the main advantage of both payday loans and logbook loans is their convenience and the speed at which they are processed. Moreover, as these are ‘no-credit-check loans’, the money reaches the borrower’s account within hours of having their application and paperwork completed.
Of the two alternative loans, payday loans are often the more accessible, as they are unsecured and so do not require any collateral on which to secure the loan. However, compared to logbook loans, they come with a higher interest rate, often upwards of 1000% vis-a-vis around 400% for logbook loans.
Thus the two comparative advantages of logbook loans are that you can borrow a higher amount if your car’s value permits and the interest rate is lower compared to payday loans. And one of the disadvantages of logbook loans is, as a prerequisite, you need to own a car, and be in possession of the V5 document (logbook) that is in your name.However, this securitisation can work in favour of logbook loans as the loan amounts are usually larger than those of payday loans. However, lenders often cap the amount lent based on what is called LTV (loan to value). So higher the value of your car the more you can borrow from a logbook lender. Typically, if your requirement is less than £500, then a payday loan may be a better option although some payday lenders often advance up to £1,000. The following table sums up the features of the two products.
Conclusion
You now have a fair idea of what logbook loans and payday loans are all about and their relative merits and demerits. As to which of these you should opt, it is up to your circumstance. Whichever credit you take, it is in your interest to make the repayments regularly and avoid unpleasant situations.
Although both products have the advantage of being convenient, one major disadvantage is that they have high annual percentage rates (APR) and so should never be considered as a long term solution to debt problems.
It is important that you determine exactly how much you need to borrow and work out which loan is best for you. But remember, these loans are only short term and are likely only to add to any long term debt problems if not used correctly.
This article explains how log book loans can help you meet urgent short term money needs.
What do you do if you need a short term loan, especially if you unfortunately have a bad credit history? The only thing you can call your asset is your car. But you need it for your daily conveyance. Then how do you get the loan you want? Log book loans can come to your help.
What are log books?
Log books are the files that are issued by the government when you register your vehicle. This file contains all the important information about your vehicle. It contains the information about the engine, the chassis, registration number, and other similar information. A log book loan is a kind of personal loan secured against a car. A UK resident who has a logbook registered in their name is eligible for logbook loans. Lenders in exchange keep the logbook of the borrowers with them against the loan. Borrowers can enjoy the complete freedom of using the car without any restrictions from the lender.
The amount that you can borrow with log book loans ranges from £500 to £50,000. The loan amount is determined on the basis of value of the car minus any outstanding payments due to be made on the car.
Things to know about log book loans
There are a few things that potential borrowers of log book loans should be aware of while signing up for one.
First and foremost, log book loans carry a high rate of interest typically in the range of 100 to 150% depending on the lending company and the amount lent relative to the value of the car. Below is given an illustrative example of how the repayment would be for a £1150 loan over a 78-week repayment period.
What happens if you do not repay the log book loan properly?
The lender has the right to claim your car you pledged as collateral in case you default on your log book loan repayment. This is something borrowers of log book loans should be conscious of. You should select a repayment term that suits your income and expenses. While a longer repayment period entails a shorter monthly payment, the total amount paid as interest will be quite high in such cases. You should carefully compare the payments to be made for different loan terms and opt for one that you think is both manageable and reasonable.
If, unfortunately, by dint of circumstances, you fall behind in repayments, you should approach the lending company and attempt to get your repayment plan reworked. Most companies are reasonable and willing to do such modifications if they find that the borrower has a genuine issue.
Ending up losing the car is the worst thing that can happen to any borrower and let that not happen to you. Given that the interest rates for log book loans are very high, it is advised that you should go for a log book loan only in very urgent situations.