Those who are in need of a quick fix, short term loan will probably tend to look at a payday loan as the only viable option, it being the best known type of loan. Do a bit of research, however, and you will realise that alternatives to payday loans are emerging, one of the most popular of which is a logbook loan.
What is a Logbook Loan?
A logbook loan involves borrowing money using your car as collateral against the value of the loan. Provided you are the owner of a vehicle which is under ten years old and possesses a full MOT, you can quickly secure a loan without having to jump through all the paperwork hoops involved with a bank loan. The loan company will legally own your vehicle until the loan is repaid so it’s important to calculate that you will be able to afford the repayments or you car could be seized to pay off your debt. The loan is generally paid back over a period of between 3 to 24 months which is a much longer period than the typical payday loan.
Logbook Loan vs. Payday Loan
Payday loans are known for being relatively easy to secure, almost too easy in some respects! It can become all too easy to become reliant on payday loans to get by which can leave you drowning in debt. Another disadvantage of payday loans is that they are regarded negatively by banks and can damage your credit rating. Payday loans are generally only a better option when compared to logbook loans if you are looking for a one-off small value loan to tide you over when an unexpected bill crops up or a similar emergency.
The major advantage of a logbook loan compared to a payday loan is that you have a lot more room to manoeuvre if you find yourself in a difficult financial situation. The reason for this is that many lenders offer a much more competitive APR with a longer period to pay the loan off. The disadvantage of a logbook loan is that your vehicle is at risk if you cannot keep up with the repayments. This can obviously have quite drastic consequences if you need your vehicle for work etc. Therefore, if you are after a smaller amount of money, a payday loan might be better. But if you need a larger sum and have calculated that you will be able to comfortably manage the repayments, a logbook loan often makes more sense. Logbook loans have the same benefit as payday loans when compared to unsecured personal loans – they are much easier to obtain if you have any history of bad credit.
In either case, whichever you opt for you should remember to invest a bit of time researching various companies and checking out the offers available about there. It’s important that you fully understand the terms and conditions of the loan you are entering into.