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How to decide between a payday, instalment or logbook loan

Logbook loan / 26/08/2016
Happy young man shaking hands with salesperson at car showroom. Horizontal shot.

So you need some cash and in a hurry. There are many lenders out there, with many loan options. Sometimes, the waters can be a little muddy in terms of choosing the loan that is the right one for you.

In this article, we will take a look at three popular loan options and how to make a choice between them.

How much do you need to lend?

Start by determining how much you need to lend. Far too often, people actually over-lend. A lending institution offers them more money than they need and they accept. This generally means they waste money on things they do not need and then live with a far bigger instalment than they needed to.

It’s simple really. If you need a little bit of cash to see you through to the end of the month, then a payday loan is the best option. Just lend enough to help you to your next paycheck. Try to avoid a cycle of doing this every month, however.

BH61N3 Woman looking in purse

If you need a bigger amount of money, then consider an instalment loan. For example, your roof has developed a leak and you need £5000 to repair it. Here, an instalment loan paid over a period that will give you affordable monthly repayments is the best option. Try to pay off the loan as quickly as possible, especially if you have a bad credit rating. This will build up your credit rating in a positive manner.

Now if you own a vehicle and need a bigger amount, say £20 000, then a logbook loan is your best option. Here, the value of your vehicle helps to secure you a loan. The vehicle provides the collateral for the lender, so if you default, they have a legal right to repossess it. Again, this kind of loan has very flexible terms and is available to individuals with a bad credit rating.

How long do you want to repay it over?

Another factor in helping you determine which loan is best for you is repayment terms. As a rule of thumb, you should be trying to repay your loan as quickly as possible. When it comes to a quick payoff time, then a payday loan is a great option, especially for smaller values.


Should you need more time to repay a bigger loan, then choose between an instalment loan and a logbook loan (but only if you can offer a vehicle as collateral).

What does the lender you have chosen specialise in?

Many people have taken out loans before with specific lenders. If they have treated you well, offer affordable loan options and have brilliant customer support, the chances are you will go back to them.

Many lenders however, specialise in certain types of loans. When needing a loan, you may then choose to opt for the loans they are experts in, especially if it fulfils the other needs highlighted above.

Perhaps the most important thing about taking out a loan is that you make an informed decision. This means taking the time to do some research, not only into which loan option is best for you, but also as to the best lender for you to enter into a contract with.

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