Payday Loans vs Logbook Loans: Which is Best?

Payday loans and logbook loans are both non-traditional ways to borrow money. Both are solutions to a financial emergency, especially if you need cash fast. If traditional banks are no longer an option that’s open to you, given bad credit history or stringent requirements, these loans could be viable choices.

How Payday Loans Work

Payday loans are designed to get you through until your next payday, hence its name. They’re most useful when you get into a situation that can’t wait until you get this month’s salary. A scenario such as your vehicle breaking down would be where a payday loan could be a good action.

Payday loans are similar to getting an advance on your salary. The process begins when the lender lets you borrow anything from around 100 to 1000 pounds. Ideally, the end of the process is reached once payday arrives and you can pay the loan in full.

This kind of loan is unsecured, although some companies accept post-dated checks as a form of collateral.

How Log book Loans Work

The logbook loan takes its name from the term “logbook”, a document that’s issued by the government to the keeper of a vehicle and contains all of the vehicle’s information and modification history. The lender takes hold of this logbook and treats your vehicle as collateral in case you default on payments.

The amount that you can borrow is based on the market value of your vehicle. The loan provider will typically lend around 50% of the car’s value, so it’s important that the vehicle is in good condition and not more than 10 years old.

This is a secured loan and gives the loaning company the right to repossess your vehicle outside of court.

What do loan providers get out of the deal?

Both payday loans and logbook loans command very high interest rates. Logbook loans are known to charge an interest of around 400% or higher, while payday loans go to four-digit percentages.

The good news is that these rates are annual percentage rates (APR)). The short-term nature of these loans means that if you pay them in full in less than a year, the interest becomes significantly smaller. Conversely, the APR is what would make these loans unsuitable to those who struggle financially, as their situation would become worse if they become incapable of making payments.

Which Loan is Better to Take?

Log book loans have several advantages over payday loans.

Because a logbook loan is secured against a car, the loanable amount is more substantial. A payday loan is entirely dependent on how much the loan provider is willing to give.

The period of repayment for a logbook loan is longer, thereby making repayment easier for the borrower. Payday loans have a more compressed schedule of payments that could make you susceptible to fines.