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

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 of obtaining a cash loan.

One market that emerged to meet this need was the payday loan scheme. However, those who carefully examine the terms and conditions of such loans may find that a logbook 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 your vehicle’s V5 or “Log Book” document. It is an easy loan method since they do not check the credit history. It is usually approved in a 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 repayment options.

Here are a few reasons why a log book loan may be the most suitable option:

1. Interest rates are significantly reduced.

Although payday loans may seem like a quick fix for borrowing cash in hand, many people don’t consider the high interest rates that come with payday 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 meant for! If you don’t pay it off quickly, you may be facing potentially debilitating debt.

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

2. Potential for larger sums in loans

While payday loans may have an appeal in that they require virtually no collateral, leaving it 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 ledger loan, which in turn gives you access to a larger potential loan sum.

Although it depends on the value of your vehicle, log book lenders can offer loans ranging from £200 to £25,000. It doesn’t matter if you’re considered self-employed or have a less than stellar credit history. Your car is typically 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 more easily managed

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 is unable to secure the funds to repay the loan, the interest accumulates quickly. This leaves borrowers sometimes forced to take out a second loan simply to pay off the first loan!

However, lenders that offer ledger loans can set you up so you can pay off the debt over a much longer period of time, anywhere from half a year to three. Plus, borrowers can design a payment plan that matches your cash flow needs, ensuring you can pay off your debt on time and without stress.