In recent years, two new loan products have become more popular in the UK: log loans and payday loans.
Both types of advance payments are of a short-term nature and do not require a credit history check to be approved. Both loans charge a certain interest rate on the loan amount, which is slightly higher than the interest rate offered by traditional financial institutions.
Therefore, both products are also targeted at the same market – those who are not eligible to borrow from traditional institutions – usually because their credit rating is compromised.
This may be where the similarity between the two products ends. The two loans are very different in nature. The following is a comparison between the two:
Collateral used in the loan
When you borrow on a payday prepayment basis, the lender extends the amount in your next check to you. Essentially, this means that you provide the lender with a final check, which includes the interest charged on the amount borrowed from the lender. The check will then be cashed on your payday and your prepayment will be cleared.
For log loans, you borrow from a vehicle you own [which can be a car, a van, or even a motorcycle]. The log loan requires that your vehicle has no or almost no previous financial financing. In good working condition and with proper insurance. The record book loan also requires you to transfer only the vehicle's record book to the lender. You are allowed to use the vehicle during the loan period. However, if you fail to repay the loan in accordance with the agreement, the lender can sell your vehicle to claim the loan amount.
The amount extended by payday loans is often referred to as “cash advances”. The amount you can get on a payday loan depends largely on your paycheck. This makes the amount actually relatively small. It is very difficult to borrow large amounts of cash loans through payday loans.
Log loan lenders have the ability to extend the loan to 75% of the value of the vehicle you own. Log loans range from £500 to £50,000. The amount expanded in the log prepayment is usually a combination of your vehicle value and your estimated ability to repay the loan.
The term of the payday advance payment is rarely more than thirty days. Because of the short-term nature of the loan, the interest rate on the design of the loan is designed to maximize the benefit of the lender in the shortest possible time. This means that as a borrower of a payday loan, you will realize that because of the high interest rates charged, you pay the lender a much larger amount than the borrowed amount.
The interest rate on log loans is higher than the interest rates charged by traditional financial institutions. However, when you compare the interest rate of the log loan with the interest rate of the payday loan, the log loan can charge a much lower interest rate, which saves you a lot of money, otherwise you will end up as interest on the payday loan. Pay.