Logbook Loans Vs Unsecured Loans
Logbook loans have seen a big increase in popularity over the past few years, especially among those who have bad credit holding them back from getting traditional loans. A logbook loan is essentially a secured loan where the logbook of the vehicle is surrendered to the lender allowing the car to be used as collateral for the loan. So what is it that makes a logbook loan such a popular choice? Let’s take a look at how they compare to unsecured loan options to find out.
Advantages of Logbook Loans
One of the main advantages associated with logbook loans is that they are available even to those who have bad credit. Even borrowers who have arrears, defaults and even CCJs (county court judgments) on their record are able to apply for this type of loan. The lenders are willing to offer loans to those who would usually be deemed a risk because they have the added security of the car which they can use to recoup losses if the borrower defaults.
The application process is also fairly straightforward in comparison to many other types of loan. Since the majority of lenders do not perform a credit check when it comes to logbook loan applications, that means the application form generally only consists of a short form requesting personal information and some details regarding the vehicle being used as collateral. Often the initial application can be done online, although the logbook will need to be presented to the lender to secure the loan.
The amount available to borrow with a logbook loan will depend on the value of the vehicle being offered as collateral. The majority of lenders will offer up to 75% of the vehicle’s current market value. If all of the paperwork is in order then it may be possible to get same day funding on the loan when approved.
Advantages of Unsecured Loans
The key advantage of an unsecured loan is that no collateral is needed. This means that the borrower is not putting their home or vehicle at risk when securing the loan. However, this does usually means that the interest charged is a little higher than it would be on a secured loan like a logbook loan. However, unsecured loans do have the benefit of having a fixed interest rate so the repayments will remain consistent every month for the full term of the loan.
It is possible for those with bad credit to apply for an unsecured loan, but in order to offset the additional risk lenders may well charge an increased interest rate on loans given to those with bad credit. The amount of money available to borrow may also be limited for those with an undesirable credit history.
Making A Comparison between Logbook Loans and Unsecured Loans
There are advantages to both types of loan – and some disadvantages too – so which one should a borrower choose? The fact that a logbook loan puts your vehicle in the balance should not really be any cause for concern. If you are seriously considering a loan, then you need to be confident in your financial ability to meet the repayments. If you know that you can afford these payments then you should also be confident that your car is not at any real risk.
While both logbook loans and unsecured loans are available to people with bad credit, unsecured loans often charge more interest because the lender does not have the added security that comes with taking ownership of your logbook. This means that a logbook loan may be more affordable in the long run. Logbook loans may also require far less paperwork.
In conclusion, both types of loan offer their own benefits and each also has their share of bad points. However, as a borrower you may find that a logbook loan is the better choice thanks to the stress free application process, lower interest rates and overall flexibility they have to offer.