This article explores whether or not it is a good idea to choose a logbook loan over a payday loan? Or vice-versa.
What is a logbook loan?
A loan that is secured against the value of your vehicle, usual loan amounts are in the region of up to 75% of the vehicle itself and there can be no outstanding finance arrangements relating to the ownership of the vehicle.
These are loans ranging from £500 all the way up to £50,000.
What is a payday loan?
A payday loan is a loan that is a short term cash advance until payday, these are intended to be loans of less than 1 month in length and are rarely over £1,000
Advantages of a logbook cash loan?
You can borrow a much larger amount of money (if your vehicle has a sufficient value to warrant the amount you wish to borrow) than with many other types of loan
The interest rates are lower than other kinds of finance due to the fact that there is a greater security placed on a logbook loan, than other types of loan, (the car is used as security) as the logbook loan is essentially a loan that is secured against the value of your car.
Disadvantages of a logbook loan?
If you default on the loan repayments, in extreme cases you could lose your car as one of the terms of the agreement is that the car can be repossessed in the event that you cannot make the repayments on the loan balance.
The interest rate is still rather high on a logbook finance agreement, there might be other options available that could be more suitable.
Advantages of a payday loan?
Quick, and very easy to get set up, cash can be made available within minutes of applying for the loan.
Convenient and easy, high availability even in the event that you have a bad credit rating.
Less than stringent qualification criteria, you only need to be employed and have enough disposable income in order to afford the loan in order to qualify.
Disadvantages of a Payday Loan?
High interest rates due to the heightened perceived risk of borrowing, with only a small amount of cash available to applicants of these cash advances, some tactics deployed by these companies are seen to be very aggressive in circumstances where a loan has been defaulted on.
Surprising rates of declines on applications for cash advances, many people being refused this kind of loan.
The truth is when considering which type of loan is the best option for you, it really is dependant on 3 factors
1/ How much money do you want to borrow? Is it more than £2,000?
2/ Are you confident that you will be able to repay the balance that you borrow?
3/ Are you willing to risk your vehicle if something happens to you that means you cannot pay your loan back?
If the answer to all of the above is YES, then perhaps a logbook loan would be a viable option for you, however if the answer to the above is NO, then it is probably advised that you apply for another kind of loan, perhaps a payday cash advance would be a good option for you.
This is something that you, as the consumer will need to assess, due to the fact that only you, the person taking out the finance has a true and honest understanding of your financial status.
More information about logbook finance available here: Logbook Loans Place