Logbook Loans: The secret weapon for people with bad credit
You often hear of payday loans when discussing loans for people with bad credit. They enable borrowers to borrow up to £1500 on average and must be repaid with the borrower’s next paycheck. These loans have been popular for quite some time but have recently come under fire due to unfair and illegal lending practices. This has led some borrowers to seek alternatives. One if the most popular payday loan alternatives is logbooks loans.
Logbook loans are a type of secured loan in which a borrower borrows cash and offers their vehicle as collateral. The borrower signs over ownership to the lender temporarily and once the loan is paid off in full, the lender turns ownership of the vehicle back to the borrower. By offering up a form of collateral, it makes it possible for lenders to have further trust in you and more likely to grant your loan.
Advantages for people with bad credit
Just like many bad credit loans the lenders that do perform credit checks do not rely on the results to decide whether or not you will be approved. The reasoning behind credit checks in general is to help determine the risk of approving a loan. People with bad credit are seen as high risk due to the fact that they have a history of missing payments, paying late, and defaulting. By offering collateral with logbook loans, you take away a majority of that risk. Just like you, lenders do not want to get cheated or lose money. When you are offering your vehicle’s registration in exchange for the loan, their fear of getting cheated is dramatically reduced.
Logbook loans are also a cheaper alternative to unsecured bad credit loans. Secured loans in general typically have lower interest rates than unsecured loans. People with bad credit have grown accustom to paying a higher interest rate due to their past issues. So hearing that logbook loans will not require them to pay as high of an interest rate as many alternatives is very refreshing for people with bad credit.
Borrow more money
With most bad credit loans, the amount that you are able to borrow is limited. Logbook loans allow you to potentially get a substantial amount more. The amount that you may borrow is impacted by the value of the vehicle you are using for collateral. It would not make sense to use your £10,000 car as collateral for a £500 loan. So logbook loans do allow you more freedom when determining the amount that you will borrow. You should not take this as a recommendation to apply for as much money as you can possibly get however. You should only borrow the amount that you absolutely need.
The ability to borrow more money means that you can borrow money for a wider variety of things than a payday loan or other small bad credit loans. Again, it is recommended that you only use logbook loans to pay for absolute necessities. Logbook loans can be of great use for people with bad credit, and you can start by applying today!