The economic recession of 2008 indeed had ripple effects on how high street banks and mainstream financial lenders approached the subject of advancing loan. The economic downturn experienced back then saw the closure or collapse of various financial institutions and the resultant effect was that a majority of banks were not willing to advance credit facilities to individuals especially if they had a poor credit rating. The popularity of payday loans and logbook loans were therefore increased by the unwillingness for banks to advance credit facilities based on their low credit score status.
Logbook loans and payday loans stepped up to fill the vacuum and by doing so, won over a legion of loyal customers. When we talk about a payday loan, we are basically speaking about a loan scheme secured on a person’s paycheck. What this essentially means is that a payday loan is repaid on the next payday. A logbook loan, on the other hand, refers to a specific type of loan secured against a person’s car logbook (V5 document). Logbook loans enjoyed great popularity because of the fact that they did not dwell on a person’s credit score and required less paperwork. Approval was also done in less than 24 hours which has made it quite popular with UK applicants. That aside, why are logbook loans more suitable than payday loans? Why should a person apply with JustLogbookLoan and give payday loans a wide berth? Let’s shed light on a number of reasons as to why a logbook loan is more suitable than a payday loan.
Logbook loans have lower interest rates compared to payday loans
In essence, payday loans are more or less considered a quick fix but what most people fail to realize is that the loans have higher interest rates as compared to logbook loans. While the average annual percentage rate (APR) for a logbook loan is in the region of 400%, the annual percentage rate for a payday loan is somewhere around 4000% which essentially means that a borrower ends up repaying insane amounts. On the other hand, logbook loans are secured on the value of the car which essentially means that the APR for logbook loans is relatively lower compared to that of a payday loan.
Prolonged loan repayment period
The reality of the matter is that the repayment period for a payday loan is relatively shorter compared to that of a logbook loan. Most of the time, a person is forced to repay the loan on the next payday and defaults only lead to exorbitant penalties and fees further building up on the loan amount. The same cannot be said about logbook loans where a person can flexibly repay the loan for up to a period of 78 weeks. This prolonged period, of course, gives the borrower flexibility to plan out the repayment.
Access to large sums of money
As earlier stated, payday loans are a quick fix and therefore you are only eligible for a fraction of your paycheck. This might prove disadvantageous especially when you are in need of a large sum of money. The same cannot be said about logbook loans as you can actually get loan amounts up to 70% of the value of your car. With such kind of money, you have leeway to accomplish something bigger with the loan amount than what you would with a meager £1500 maximum payday loan amount.