Seizing up Logbook Loans and Payday Loans
Both of these loan types are short-term in nature, although payday loans are somewhat shorter (one month) and both don't include a credit rating check in order be accreted for them. In addition, both loans include a higher interest rate than you can find with standard loans.
In addition, the two loan options most often target people with poor or no credit rating, who would not be able to get a loan from a more traditional financial institution, such as a bank.
As you can see, logbook and payday loans indeed have several similarities between them, but they also have a lot separating them. Here is a quick comparison of the two:
1. Loan Amount
A logbook loan allows the borrower to get up to 75% of the value of his vehicle he owns. With these loans yo can borrower anywhere between £500 and £50,000, regardless of the purpose. The amount granted is the combination of the value of the vehicle and the borrower's perceived ability to repay the loan.
When it comes to the payday loan, the amount extended by the lender is much smaller than it is with a logbook loan. Since these loans are basically secured on your next paycheck, you can only borrow between £100 and £1000.
2. Security against the loan
Logbook loans can only be obtained if you provide your vehicle's logbook registration document as a collateral against them. However, not every vehicle will be accepted. First of all, the vehicle has to be insured, taxed and free of other finances. Also, the vehicle needs to have an MOT certificate. This document is acquired every three years and proves that it is in good condition. Finally, the vehicle can't be older than 7 years in order to be accepted for this loan.
Payday loans, on the other hand, don't include a collateral. Instead, when the loan is due to be paid, which is usually in one month, the lender takes the amount from the borrower's bank account, or the borrower uploads the money himself, depending on the contract.
3. Interest rates
Since payday loans don't last over thirty days, the lender is interested in getting the most out of them financially in such a short time. Because of this, he charges very high interest rates, which can often go as far as 1000%. The average is around 400-500%. What this means is that you'll be paying a considerably larger amount to the lender than you borrowed.
Logbook loans also include a higher interest rate, but not as high as with payday advances. Usually, they average around 200% and not going over 500%. While this is still higher than with standard loans, but a large margin, it is nowhere near payday loans.
Well, now you know the main differences between payday and logbook loans. If you are looking for a quick and credit check-free financing option, logbook loan is probably the better option of the two.