Along with a number of similarities, there are also a fair few differences that separate logbook loans and payday loans. In this article we’ll explore these in more detail as well as delve into the respective benefits and drawbacks of each.
So, first of all, what are the differences?
The biggest difference is the way in which the loans are secured. With payday loans, this is done purely on the basis of your salary; however, in the case of logbook loans, a vehicle is required to act as a form of insurance for the debt. In either case, it is vital that you are able to meet the minimum requirements of the lender in order to obtain the necessary funds.
Logbook loans also don’t have the same time restrictions when it comes to repayments. This means that you can spread the cost of the loan over a longer period, even up to a number of years if necessary. In the case of payday loans, you will only ever be given a maximum of around 30 days to come up with the necessary funds.
Another major difference can be found in the amount available to first-time applicants. In the most part, payday loan companies are reluctant to offer more than £400 to £600 to anybody who hasn’t previously used their services. This can be a little restricting, particularly when you’re looking to secure a sizeable amount.
In the case of logbook loans, you will often be able to get thousands, if not tens of thousands of pounds quickly and easily. This is entirely dependent on the overall value of your vehicle though, so the higher its valuation, the more credit you can access. As your vehicle’s logbook will be used as collateral, there is a risk of repossession if you are unable to keep up with repayments. The same risk doesn’t exist entirely with payday loans, although you will receive charges for failing to fulfil the terms of your agreement.
Many loans, including mortgages and personal loans will require some form of collateral as cover. For larger amounts, some lenders will even require that equity in your home is put up as a guarantee. This is simply required to ensure that the lender isn’t left out of pocket in the event that a borrower is unable to repay.
Repossessions are mercifully rare; however, they are a risk that you shouldn’t be willing to take too lightly. When you put anything up as collateral, there is always going to be the chance that it could be taken from you, which is why you always need to be doubly careful when applying.
Now for some similarities…
Both payday loans and logbook loans accept applications from almost anybody and will rarely carry out a credit check to verify your financial status. As mentioned previously, payday loans use an applicant’s salary to determine their risk rating, whilst logbook loans are provided on the basis of a vehicle’s value. In either case, there is no need to carry out the level of checks that are customary on many other forms of credit and borrowing.
Equally, these forms of borrowing are both reasonably quick. Payday loans are well-known for the speed with which applications are processed and the cash is transferred. Occasionally it can all be completed within an hour, leaving most other alternatives firmly in its wake. Whilst not quite this swift, you can often get a decision on a logbook loan within a day. The delay is simply caused by the evaluation of the vehicle and establishing how much you can borrow, as well as determining whether you qualify.
So, as you can probably tell, there are plenty of things that separate as well as bind logbook and payday loans. Whichever one you choose, it’s important to establish which one best meets your needs and your ability to cover the cost of borrowing. Coming up short with repayments can be very expensive indeed, possibly even costing you your method of transportation.