Its never easy to choose between different types of lending, when you need money, so we’ve compared two more types of borrowing, from the mainstream credit card to the more alternative logbook loan.
1. Type of borrowing
- Logbook loans
- Secured on your car via a Bill of Sale, you keep your car and carry on driving, but the lender can repossess your vehicle if you default.
- Credit cards
- Unsecured, so no specific assets are at risk, although non‑payment will damage your credit report and can also lead to court action, and bailiff collection.
2. Cost
- Logbook loans
- high cost credit, with APRs that can reach several hundred percent, but can usually be repaid immediately and avoid the high cost.
- Credit cards
- Average is APR is also high, although some cards offer an initial 0% purchase term or balance‑transfer from other cards.
3. Eligibility
- Logbook loans
- Often easier to obtain, as the loan is secured on your vehicle. (Applicants are still credit assessed)
- Credit cards
- Harder to get with bad credit, issuers typically rely heavily on your credit history and income.
4. Risks
- Logbook loans
- Arrears can quickly lead to repossession of your vehicle and additional charges.
- Credit cards
- Missed payments will damage your credit score and can lead to court action, with possible debt collection.
5. Flexibility
- Logbook loans
- Fixed term with set repayments, some lenders will allow fee free early settlement but charges vary by firm, loans are often used for emergencies or consolidating a few short‑term debts.
- Credit cards
- Flexible repayments, but that same flexibility makes it easy to drift into long‑term debt if you’re not disciplined. Best for short‑term spending where you can repay in full.
Which is usually better?
- For a small amount of lending, a well‑managed credit card is usually cheaper and less risky than a logbook loan, especially if you can access 0% or lower‑rate deals and repay quickly.
- For a large amount of money, a logbook loan can be a quick option for borrowers who have a car, and cannot get mainstream credit.
Whichever one you choose, compare total cost, read all the small print (from fees, default charges to collection procedure), and make sure the repayments fit comfortably into your budget.