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Payday Loans vs. Logbook Loans

When you have good credit and you need a personal loan, your options are wide and varied. If you have bad credit and you need quick cash, however, that’s a different story altogether.

For people with bad credit, rejections are pretty common especially from major banks and high street lenders. Alternatives to traditional personal loans such as credit union and peer-to-peer lending also often require at least a fair credit score. That leaves people with a history of ccjs, defaults and even bankruptcy with little to no options at all.

To respond to the ever-growing need for bad credit loans, the lending industry in the UK came up with financial products such as payday loans and logbook loans. Even if you have bad credit, you are welcome to avail the loan since there is no credit check involved anyway. In fact, approval can be completed in as little as a day with this type of loans.

Now you might think these financial products are too good to be true and partly they are seeing that they are advertised with the promise of quick cash. But what most people don’t know is that these loans are quite controversial for their steep interest rates and hefty fees. Before you go ahead and resort to these loan options, it’s important to understand the cost as well as the risks associated with the loan.

Payday Loans

Starting off with the highly popular and widely criticized payday loans, the financial product has been growing in popularity despite financial experts advising borrowers to avoid it by all means. But what exactly are payday loans?

Payday loans are unsecured personal loans you can get approved for within the same day you applied. Loan amounts range from £100 to £1,000 payable in 28 days or on your next paycheck. It is especially created for people with bad credit. No matter your credit score, you can apply for the loan but at a cost. The financial product comes with a hefty representative APR that averages at 1,000%.

Payday loans come handy for people with bad credit who have no property or asset they can use as collateral. Most borrowers use it to cover unexpected expenses such as car repair, overdue rent and the like.

Logbook Loans

If you are a vehicle owner with bad credit, one option you can look at is logbook loans. As the name suggests, logbook loans are loans secured against your vehicle. When approved for the loan, what happens, in essence is you handing over temporary ownership of your vehicle to your lender. The lender keeps the logbook document while you get to keep and still use your car.

Logbook loan lenders offer loan amounts from £500 to £50,000 at repayment terms from 12 months to 36 months. In most cases, the maximum amount you can borrow is equivalent to 70% of your car’s official trade value. Compared to payday loans, logbook loans are more flexible and cheaper at an average representative APR of 400%. Some lenders such as SimpleLogbookLoan offer lower interest rate to offer customers a more affordable solution to their financial troubles.

There’s just one downside with logbook loans. Because the loan is secured against your car, there is always the risk of vehicle repossession. In the event that you can’t repay the loan, lenders can recover your car to cover for your outstanding balance. But as long as you know you can afford the loan, logbook loans make a better option than payday loans especially in terms of flexibility and cost.


Your Quick Guide to Personal Loans

No matter the amount or purpose of a personal loan, it is imperative to understand that borrowing money is a major financial move. One mistake and you might face years of financial consequences. One wrong move and your credit score could get hurt resulting in a domino of financial troubles. Avoid all that by knowing exactly what you are getting into. Whether this is your first time or you’ve done this before, here is a quick guide to personal loans today.

What are the types of personal loans?

Personal loans, as the name suggests, are financial instruments designed to meet a wide variety of personal loans. From overdue bills to rent payments, medical expenses, home renovation, vacation and money more, personal loans come handy for many consumers.

Before you go ahead and sign any dotted line, however, you need to understand that there are two major categories of personal loans, which are secured and unsecured loans. Secured loans are loans that require a security typically your home or vehicle. Unsecured loans, on one hand, do not require any collateral therefore easier and faster to avail.

Common examples of secured loans in the UK include mortgage loans, car loans and home equity loans. Since the loan is secured against a security, these types of loans offer larger loan amounts and longer repayment terms. Approval may take time seeing that lenders have to run credit checks and other types of assessment processes.

As for unsecured loans, anyone with a fair credit score can avail the financial products. Unsecured loans are available from major banks, high street lenders and even peer to peer companies. To cater to those with a bad credit history, payday loans are unsecured loans advertised with a promise of super quick cash.

How much do personal loans cost?

The cost of a personal loan varies from type to type. But in general, secured loans are cheaper because the loan is secured against an asset in the first place. This means the risks for lenders are lower allowing them lend larger sums of money at longer repayment terms and at a price most borrowers can afford. Unsecured loans, on one hand, entail higher risks for lenders. They compensate for said risks by raising the financial product’s interest rates. In addition, they also include hefty fees and charges.

Even if more costly than secured loans, unsecured loans remain a viable option for borrowers because it can still be cheaper than credit cards. It’s a matter of looking for the right type of unsecured loan from the right lender to meet your personal financial needs.

When to take out a personal loan?

Reasons for taking out a personal loan vary from borrower to borrower but the most common include paying for overdue bills, car repair, medical expense, vacation and other personal investments. What ever your reasons maybe, in the spirit of responsible borrowing, it’s very important to borrow with caution. That means following the simple rule of thumb to borrow only what you need and what you can afford every time. As long as you can afford the monthly repayments, you have nothing to worry about. Just make sure to pay your dues on or if possible before your due dates to avoid any major financial consequences that most often than not will only lead to headaches.

If you have bad credit and you hope to take out a bad credit loan, make sure you put in extra time for research. Investigate the interest rates and hidden fees in particular so you won’t get stuck with a very expensive loan.


8 Top Tips for Responsible Borrowing

Borrowing money is no simple matter. When your financial circumstance requires you to take out a loan, take it seriously because one wrong move, one wrong mistake can lead to years of suffering from the consequences. In the spirit of promoting responsible borrowing, below are top tips to keep in mind if you do decide to apply for a personal loan anytime soon.

Do your homework

Never shop around for a loan unprepared. If you want to know the best options for your particular needs, you need to do your homework. Research, at the end of the day, is the key to finding the best loan deals in the UK. Start by first assessing your needs then determine whether a secured or unsecured loan is more appropriate for your case. Continue to trim down your choices until you find a deal that suits your needs to a tee.

Take advantage of comparison sites

You may also use top comparison sites. Just make sure you only rely on websites with a strong track record. A good comparison site does most of the brunt work for you. They research and scout the market for the best loan deals then comes up with a top ten list you can choose from. Comparison sites make it easier for you to compare key factors such as interest rate, loan amount, repayment terms and other such things.

Use loan calculators

If you’ve decided with the right type of loan and you want an accurate estimate of what the loan will cost, you can use loan calculators. Most providers have it in their websites so might as well take advantage. You can also request for quotes from your top lender choices so you can trim down your options further.
Compute your debt-to-income ratio
This part is a bit more technical but it’s one of the best gauges if you’re ready for a loan financially. What you need to do is figure out your debt-to-income ratio. There are handy online calculators you can use for this. If your ratio is at least 1.0, you’re in for some good news because you are in a good financial position to take out a loan. A ratio below 1.0 means it might be better to put off the loan at the moment.

Create a solid repayment plan

If you do decide to continue with the loan, you need a solid repayment plan. Otherwise, you may end up like most borrowers are in now – drowning in debt because they weren’t responsible enough to take their borrowing seriously. Only when you have a solid repayment plan can you ensure that your debt won’t go out of hand.

Borrow only what you need and can afford

This part is common sense but most borrowers still miss it. To avoid any financial complications as a result of irresponsible borrowing, follow the simple rule to borrow only what you need. You should only borrow more if you’re sure that doing so is cheaper in the end. It also follows that you should only borrow what you can afford. Make sure your loan is in sync with your budget for a hassle-free borrowing.

Commit to pay on time

Once approved for a loan, there is really just one thing to do now as a responsible borrower. Stick to your repayment plan. This means you committing to pay your loan on or before your due date every month. Keep at it until the end of the loan and you might even see a significant improvement on your credit score if you have a bad one to begin with.


Best Unsecured Loans Providers in the UK

If you have good credit and you’re looking for an unsecured personal loan, don’t stress yourself comparing a plethora of options offered in the market. To save you time and effort, here is a quick overview of the top unsecured loan lenders in the UK lending industry. In no particular order, below are the best lenders you can check out:


For loans from £1,000 to £15,000, Lendable is included in the list for its promise of quick cash at 9% Rep APR. You can apply for the loan online and expect to have your approval confirmed in a matter of hours. The loan has a repayment term of 12 months.


Offering relatively a lower Rep APR at 7.9% is Moneyway for loans from £3,000 to £15,000. The repayment terms are also longer start from one year to 5 years. To apply, you may need to visit the lender’s office directly.

Sainsbury’s Bank

If you need a large sum of money for your personal needs, Sainsbury’s Bank offers loans from £25,000 to £35,000 at 6.9% APR. Not bad at all considering that there is no security required to available the loan. As for the repayment terms, you can tailor it according as long as it falls within 2 to 5 years.

Ulster Bank

Another provider worth considering is Ulster Bank which offer flexible personal loans from  £1,000 to £25,000 payable in 1 to 5 years at 6.4% Rep APR. The loan, however, as of the moment is only available to existing customers. If you an account holder of said bank, you are welcome to take advantage of this offer.

Yorkshire Bank

Combining instant decision and fair rates is Yorkshire Bank offering loan amounts from £1,000 to £25,000 at Rep APR of 4.9%. This offer is one of the most affordable in the market. Add to that the flexible repayment terms starting from 1 year to 7 years and you’ve got one viable option on your hands.


Offering the same Rep APR of 4.9% as Yorkshire Bank is NatWest for personal loans from £1,000 to £25,000. Repayment terms are just as flexible from 1 year to 7 years. Just remember that if you do decide to repay the loan early, there is an early redemption charge that applies.


Why I Do Not Recommend Payday Loans

If you’ve found yourself needing a personal loan at one time or another, chances are high that you’ve probably heard of payday loans. Payday loans are advertised as quick cash solutions to your pressing financial needs. Approval is confirmed within the same day or sometimes instantly making it a go to unsecured personal loan for borrowers with bad credit.

While easy and super quick to avail, payday loans come with steep interest rates and hefty hidden charges. Even if lenders are supposedly taking high risks offering you a short term financing, borrowers in the end are still the ones at a disadvantage.

With payday loans, you can borrow from £100 to £1,000 payable in 28 days or on your next pay check. The loan amount is pretty small compared with other personal loans especially the secured ones but many borrowers continue to find it handy for a range of personal needs. If you’re overdue on your rent, for example, and you’ve exhausted cheaper alternatives, payday loans seem like the best way out. In some instances, payday loans do save the day but at a very high cost.

Payday loans in general come with a Rep APR of 1,000%. Take note, that’s just the representative APR. Most of the time, lenders charge more than said average making it hard for borrowers to pay for the loan. Since the loan is tailored for people with bad credit and who earns the bare minimum wage, rather than offer help, the loan product has a tendency to trap borrowers in a debt cycle.

After repaying the loan with their paycheck, many borrowers are likely to take out a loan again seeing that their budget is short again. There have been many cases where borrowers were unable to repay the loan in the end escalating the loan’s interest further.

The fact that payday loans lead to a debt trap that’s often very difficult to get out of is the very reason why I don’t recommend payday loans. What good does quick cash do when in the end you suffer anyway?

bright picture of happy woman with credit card

Getting an Unsecured Loan with Good Credit. Is it Wise?

Unsecured loans such as payday loans are notoriously popular for getting struggling borrowers with bad credit into a debt trap. Payday loans, in particular, are widely criticized for their steep interest and hefty fees.  Once you started borrowing, it’s difficult to get out.

Unsecured loans, however, are not restricted to only payday loans. As banks and high street lenders offer unsecured loans, the financial product has moved upscale and has now become a viable option even for people with good credit.

In order to keep up with the competition, banks lure customers with personal loans at competitive interest rates. They target those who are less likely to default offering them personal loans they can use to pay off high interest credit cards and other types of debts. This strategy thus far is working. In fact, the banking industry has offered billions of personal loans for borrowers across UK. It also looks like that the trend is not going to slow down anytime soon.

Because unsecured personal loans are not secured against any asset, the financial product is less risky for borrowers and less risk is often an irresistible incentive many can’t refuse. Other than that, these loans are also processed quickly. For borrowers with a good credit score, approval is confirmed within hours after the application is assessed. This means quick cash at an affordable rate without the worries of repossession.

To answer the question if it’s wise to take out an unsecured loan when you have bad credit, it’s a big yes.  With banks tailoring their offers in a way that will benefit borrowers the most, you shouldn’t think twice but take advantage.  Grab the opportunity while it lasts and use the money as recommended to repay your high interest credit card bills and other debt. This way, you lower your overall debt interest while fast tracking your journey towards financial freedom. Like with any other type of loans, however, just make sure you borrow only what you can afford to repay.