With the recent economic turmoil in the world, it’s no surprise that many people are struggling to find ways to get cash fast. For this, short-term loans have often been a perfect fit.

But as many banks have also been hit by the recession, they are increasingly wary of lending to consumers. As a result, people are forced to look for alternative means to obtain a cash loan.

One market that arose to fill this need was the payday loan scheme. However, those who carefully examine the terms and conditions of such loans may find that a log book loan is better suited to their needs and has less risk than a payday loan.

What is a logbook loan?

A log book loan is a loan made against the V5 document or “Log Book” of your vehicle. It is an easy method of loan since they do not verify the credit history. It is usually approved in one day and requires much less paperwork. Although it has a requirement, ie. The vehicle must be free of financing and must not be more than 12 -13 years old. Still, it is considered as a better alternative to payday loans due to low interest rates and flexible payment options.

Here are some reasons why a log book loan may be the most appropriate option:

1. Interest rates are significantly reduced.

Although payday loans may seem like a quick fix for a cash-in-hand loan, many people don’t consider the high interest rates that come with such loans.

Payday loans can sometimes come with APRs in excess of 4,000%, leaving borrowers paying substantially more than they originally borrowed. It does little to help your cash flow stabilize, which is what loans are for! If you don’t pay it off quickly, you may be facing potentially debilitating debt.

However, log book loans are secured against the value of the borrower’s car, which generally means the APRs are much lower, meaning it’s more manageable debt and easier to pay off.

2. Potential for larger sums in loans

While payday loans can have an appeal in that they require virtually no collateral, leaving you a no-strings-attached type of loan, if you already own a vehicle, you have a high-value asset in your possession. This asset can be used to help obtain a log book loan, which in turn gives you access to a larger potential sum for the loan.

Although it depends on the value of your vehicle, log book lenders can offer loans ranging from £200 up to £25,000. It doesn’t matter if you’re considered self-employed or have a less than stellar credit history. Your car is generally the second most valuable asset you own, and you can make that asset work harder for you by getting a log book loan.

3. Loan periods are easier to manage

Payday loans are designed to be a quick fix, that is, a short-term solution. What that means is that you will have to pay off the loan in a relatively short period of time. If the borrower cannot secure the funds to repay the loan, interest accrues quickly. This leaves borrowers sometimes forced to take out a second loan simply to pay off the first loan!

However, lenders who offer log book loans can set you up so that you can pay off the debt in a much longer period of time, anywhere from half a year to three. Plus, borrowers can design a repayment plan that matches your cash flow needs, ensuring you can repay your debt in a timely and stress-free manner.