If times are tough and you need a little financial assistance, the current range of credit options is light years away from what was available previously. Whereas having a poor credit rating a few years ago would have left you out in the financial cold, a whole host of specialist “bad credit loans” such as payday loans, logbook loans, guarantor loans and no credit check loans are now available.
Whilst all of these loans are currently available to almost anyone, it is important to do a little bit of homework so that you can make an informed decision regarding which is better for you. Payday loans can work out to be quite expensive, especially if you are unable to repay them on time but the “logbook loan” has been gathering momentum recently despite the fact that it can be a risky loan to take out.
What is a Logbook Loan?
Logbook loans are short term secured loans, and as such there are no stipulations regarding how the money can be spent. Doesn’t sound too bad so far? The catch is that to be eligible for a logbook loan, you must be prepared to hand over the V5 logbook for your car. This is because the loan will be secured against the value of your vehicle and if you find yourself in a position where you cannot afford to keep making the repayments, the lender will be quite within their rights to keep your car. Logbook loan interest rates are considerably higher than the interest rates for standard personal loans and often run into well over 100% APR. If you are unable to repay the loan, there is every chance that the lender will repossess your vehicle and sell it at an auction to recover its costs. This may not be the end of the matter though because if the sale price at auction does not cover the money owed, you will still be responsible for paying off the remainder of the loan. However, if you are unable to make the payments, but turn over the vehicle on your own before actions are taken to repossess it, the lender may consider this payment in full on the loan.
A Far Better Option
Of all of the “bad credit loan” options currently available, there is one that stands head and shoulders above the rest. Not only in terms of affordability but also due to the fact that the risks involved are minimal compared to many of their counterparts. The guarantor loan is actually quite an old fashioned type of loan but due to the fact that it offers a financial lifeline to borrowers with a poor credit rating, has recently made a resurgence in popularity. Rather than charging an exorbitant rate of interest to help balance the perceived risk to the lender, the lender instead requests the presence of a guarantor who will co-sign the loan agreement. By doing this they will, “guarantee” – hence the name, that they will make the repayments should the borrower fall into difficulty. So long as the guarantor ticks the required boxes with the lender, i.e aged between 18 & 75, has a good credit rating of their own etc, there is an excellent chance that the borrower will be eligible for a guarantor loan. As with all aspects of finance, a bit of homework is crucial. There is absolutely no need to put your property at risk when far better options are currently available.
Amanda Gillam is Solution Loans's General Manager and has been since 2009. She is also a prolific writer on personal finance issues, and has been quoted numerous times in articles published on 3rd party websites and in press releases. Her...Read about Amanda Gillam