Those who need a quick fix, short-term loan will tend to look at instant payday loans as the only viable option, but we’d encourage you to do a bit of research before you take the plunge. There are alternative solutions, including the logbook loan.
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What is a logbook loan?
A logbook loan involves borrowing money using your car as collateral against the value of the loan. Providing you are the owner of a vehicle, which is under ten years old, with 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 it is repaid, so it’s important to calculate whether you can reasonably afford the repayments, or your car could be seized to counter the debt.
Generally paid back over a period of between 3 to 24 months, this is a much longer period than the typical payday loan.
What is a payday loan?
A short-term solution for small sums of money, this quick fix to cashflow issues is easily acquired, although interest rates for pay day loans are very high. Tread with caution and make sure you’re fully aware of the consequences in the event you are unable to pay back the loan.
Logbook loan vs. payday loan
Payday loans are known for being relatively simple to secure, almost too much so in some respects, as it can be all too easy to become reliant on them to get by, which can leave you drowning in debt. Regarded negatively by banks, they can seriously impact your credit rating – if you have taken out a payday loan in the past, you might want to check your credit score.
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, then this type of loan might be a viable option.
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. Many lenders offer a much more competitive APR, with a longer period to repay the debt.
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 it for work, etc.
If you require 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.
Although the logbook loan is secured against your vehicle, you still have the benefit of making full use of it while you make the repayments. Logbook loans for older cars, especially classic vehicles, are also a great way to secure the funds you might be so desperately seeking.
