Most of the time I would never say that it’s advisable to take out a loan for something like Christmas, but a lot of logbook lenders offer loans for £500. Statistics do show that loans are smaller around this time of year because people are looking for a small amount of cash to buy Christmas presents.
The Money Advice Service says that people expected to spend £487 on Christmas last year, which is actually less than the year before, but it confirms that a £500 loan will be about enough to pay for the average Christmas.
Borrowers know that they will have the rest of the year to pay the loan back if needed. Some will take that long, whereas others will repay the loans back early. Some might even take out another loan to pay back the original one, this really isn’t what they should be doing. It’s the people who can manage their money well who are able to take out a short term loan and come out the other side unscathed.
Lenders do have flexibility
The figures from these lenders does show however that payment defaults are high. Lenders can be more flexible than many outside of the industry think. A lot of people’s opinions on the short term loan industry are that if you default on a payment, that’s it, you’ll have astronomic charges and if you take out a logbook loan your car will be repossessed.
For most lenders this is the last resort because it costs them to chase debts. It is far easier for them to come to an agreement with customers who aren’t able to make payments and give them a chance to pay at least a reasonable amount of money back. These companies would be far happier receiving some kind of cash into their bank accounts, rather than nothing that they might otherwise receive.
Profits have to be made
At the same time, lenders are not charities and their business model is based on making profits from lending out money and receiving interest payments on this.
Payday loans have traditionally been used over Christmas because they are for smaller amounts and are meant to be over a short period of time. But borrowing against a car can also be a way to raise cash, pay lower interest rates and also have longer to pay the loan off. It can generally be paid off over 2 years if really needed, although this will result in very high interest payments, especially with some of the more expensive lenders.