Two of the most popular and controversial bad credit loan options for people with problems on their credit scores are logbook loans and payday loans. Both offer the promise of quick cash and both financial products don’t require credit checks hence faster approval for your loan application every time. But which one of the two loan products is better? Should you take out a logbook loan for your medical expense or opt for a payday loan instead? This guide will help you make the right decision.

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Payday loans vs. Logbook loans

Payday loans are unsecured loans ideal for borrowers in need of quick cash for a variety of personal needs. Offers start from £100 up to £1,000 payable after 28 days or on your next paycheck. The loan product is typically offered for full-time employees who can provide proof of income. As long as you have your recent pay slips handy, you can apply for a payday loan and get approved instantly. There’s no security or collateral involved making it a convenient source of financing for overdue bills, car repair and more.

Logbook loans, on one hand, are secured personal loans offered for people with bad credit who are also car owners. In addition to meeting the basic requirements, the borrower must own a vehicle to secure the loan against. Because of the collateral, you can borrow way more money than if you simply apply for a payday loan. With a logbook loan deal, you can apply for loans between £500 and £25,000. Some lenders may even offer more depending on your vehicle’s official trade value. Because logbook loan providers offer larger loan amounts, it’s typically ideal for major financial emergencies and needs including medical expenses, business expansion, home renovation, etc.

Comparing Cost

When it comes to the cost, both loans are quite costly. One of the reasons why logbook loans and payday loans are hounded with controversies is because of the steep interest rates. Payday loans, for instance, have a representative APR of 1,000% on average. If you borrow £80 over 29 days and the interest is fixed at 292.8% and the representative APR is 1,291.8% then the total amount of payments you’ll make is £98.56. That’s about £18.56 in interest.

At first glance, logbook loans may look cheaper because it has a representative APR of 400% on average, which is clearly cheaper than that of payday loans. For example, if the representative APR for your logbook loan deal is 450% and you want to borrow £850 over an 18-month term and the interest is flat rate at 132% per annum then you’ll be paying a total of £2,533 or about £141 per month. Click more info to know more about logbook loans.

As you can see, both loans are pretty expensive. Careful planning is essential whichever of the two loan products you pick. Either way, you’ll be paying a lot of money in interest. But then again, that’s one of the consequences you must accept if you have a bad credit score.

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Which one is better?

While logbook loans and payday loans are easy loans, they are mostly disadvantageous for borrowers because of the cost. But if you think it necessary to resort to these loans, there are only two things to keep in mind. No one loan is better; it really depends on your needs and on your financial capability to repay. And if you do resort to these loans, make sure to keep the borrowing within affordability and commit to timely payments per month to avoid any more financial problems.