Unless you’re a Rockefeller, chances are that you need money. We all do. The easiest way to get it is to apply for a loan, but do you know what kind of loans would best suit your interests?
Depending on how much money you need and what your financial history looks like, your best bet may be secured loans. These can be the traditional homeowner loans, or logbook loans like the ones offered by www.logbookloansonline.net – the latter is a secured loan like a homeowner one, except you secure the loan with your car, instead of your house. Which one is better?
What is a secured loan?
You may already be familiar with secured loans, but if you’re not, here are the basics you need to know. A secured loan is a loan that is secured with an asset (such as a house, a vehicle, or another property) that you put up as collateral. This is done in order to protect the lender in the case the borrower defaults on the loan or does not repay the money consistently.
The secured nature of this sort of loan comes with advantages, as well as disadvantages, depending on your situation and interests and what you are looking to achieve with this transaction.
The amount of money you can receive depends on the value of your asset, and is generally higher than the one you would receive with an unsecured loan.
The other major benefit is that because the loan is already secured, you do not need to provide additional security in the form of a very high interest payment, or even an exceptional credit rating. In that respect, a secured loan can be quite advantageous.
The downsides, of course, are firstly, that you risk losing the asset to the lender if you cannot repay the money. Then, there is the fact that this is a long-term commitment, and it can be very inconvenient to be tied to a loan for decades, especially when you plan on making a big move.
The differences between a logbook loan and a homeowner loan
A logbook loan offers you less money, while a homeowner loan gives you access to more
Because when it comes to amounts, secured loans are based on the assessed value of your asset, a logbook loan offers less money than a homeowner loan. It makes sense, as vehicles are much less valuable and expensive than homes. In addition, a house can appreciate in value, while a vehicle generally only depreciates.
The other thing to keep in mind is that you will only receive a percentage (let’s say 70 per cent or 80 per cent) of the total assessed value of the car. Make sure to leave the assessment in the hands of an independent third party, and not the lending company.
A logbook loan has a higher interest rate than a homeowner loan
As far as the interest rate goes, one of the major advantages of homeowner loans is that you can get them with lower interest rates. Logbook loans, in comparison, attract a higher interest rate. If that is one of your primary concerns, then this point may sway you towards one type of loan over the other, but it’s not enough to base your decision on this one factor.
A logbook loan comes with a shorter repayment term than a homeowner loan
If you’re a person who plans long-term, you need to be well aware of the fact that secured loans are commitments you make or an extended amount of time. It is not unusual for these loans to go on for decades, so be prepared to pay for the foreseeable future.
That can be convenient, because it means you pay smaller instalments, or inconvenient, because it means you will be paying every month for a long time and a chunk of your money will always be accounted for.
The similarities between a logbook loan and a homeowner loan
Both loans are secured with an asset
As both of these loans are secured loans, it follows logically that they are both secured with an asset. While homeowner loans are secured using your home as collateral, logbook loans are secured using your vehicle. In the case of logbook loans, you are required to hand over the V5 papers (also known as logbook) and registration, but the advantage is that you get to keep the car and use it normally while you pay back your loan.
Of course, they also have the same drawbacks, the most important of which is the fact that any asset that is used to secure a loan can also be lost, if you should become unable to pay it back. Both your car and your home can be repossessed, so make sure to stay on top of your loan repayments.
Both loans have the same repayment method, in instalments
The other similarity is that both these loans are repaid in the same way. Meaning, you pay in fixed, regular instalments for a longer or shorter period, depending on how much money you borrowed and what your contract says. Make sure you opt for instalments you can afford to pay. If you fall behind on payments and can’t afford to get back on your feet, you may very well need to file for bankruptcy and lose the asset.
As you can see, secured loans can serve as tremendous help when you have a major expense to cover, such as home renovations, an investment, a major purchase, an important event, perhaps education, etc. Whether you opt for logbook loans or homeowner loans depends on your needs and your preferences.
Revise your situation carefully and ask yourself: How much money do I need?, How much interest am I willing to pay?, Am I happy to pay off this loan for the next 20 years?. Make a decision only after giving each answer careful consideration.