Payday loans versus logbook loans: which is better?

Have you ever found yourself approaching the end of the month, with bills that need to be paid... only to discover, in all of your calculations, that your income just doesn't quite cover your expenses? Indeed, this might not be too much cause for alarm, if it's the case that you'll have more than enough money with which to pay your bills in just a few weeks' time. In the meantime, though, you may require a short-term injection of cash to 'tide you over'. It's in such a situation that you may well consider such short-term loan solutions as payday or logbook loans.

Now, this begs the obvious question... what are the differences between these two types of loan? And in which circumstances might you prefer to opt for one over the other? Here, we consider the respective qualities of payday loans and logbook loans.

Payday loans

This is the name given to a certain type of unsecured loan that is very much intended to act as a 'stop-gap' in situations of temporary financial difficulty. The idea is that the payday loan acts as a momentary cash injection that is then paid back once you are paid again by your employer. You can typically borrow several hundred pounds, which you may be able to access on the same day as you apply. Indeed, the online application process is also usually quite simple, giving you the chance to receive that much-needed instant decision.

If there are downsides with payday loans, however, it's that you may not be able to obtain one if you are self-employed, or for that matter if you have bad credit, such as in the form of County Court Judgements (CCJs). Many payday lenders will tend to carry out credit checks, which may make it difficult for you to gain that much-needed approval.

Logbook loans

The 'logbook' element of logbook loans refers to a car's logbook, against which this type of loan is secured. Yes, that's right... logbook loans are secured loans, not unlike those that use your home as security instead of your vehicle. To be eligible for this type of loan, you really just need to be a UK resident of at least 18 years old who also happens to be a legal owner of a car. The car must also be free of other finance, and you must also have access to all of the relevant documentation.

You can obtain logbook loans even if you have bad credit or are unemployed, and nor do you need to have a credit card. You can borrow against your car even if it is ten years old or older, and can also borrow against any van or light commercial vehicle of which you are the legal owner.

You do have to bear in mind, though, that a failure to keep up with your repayments brings with it the risk of your car being repossessed and sold. After all, that is the security that makes the existence of logbook loans possible!