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What is the Difference Between a Logbook Loan and a Payday Loan?

Two popular and alternative options when needing to borrow money quickly, are, logbook loans and payday loans. While both offer quick access to funds, they are both vastly different.

Logbook LoansA logbook loan is a type of secured lending where the borrower hands over their vehicle’s logbook (V5 registration document) and therefore ownership, as collateral. The amount you can borrow is ultimately determined by the value of your vehicle, and repayment terms can range from several months to a few years.

Payday Loans – Payday loans, on the other hand, are a short-term, unsecured loan, created to cover expenses until the borrower’s next paycheck. These loans are usually for smaller amounts and have higher interest rates compared to logbook loans. Repayment terms are also shorter, ranging from a few days to a few weeks.

Logbook Loans Vs Payday Loans Compared

Use of Collateral

A fundamental difference between logbook loans and payday loans is the presence of collateral. Logbook loans require the borrower to provide their vehicle as a security, ensuring that the lender possesses an asset in case of default. In contrast, payday loans are unsecured and do not require any collateral.

Loan Amount

As the value of their vehicle determines the possible maximum loan amount, logbook loans generally allow borrowers to access a greater amount of money. Payday loans, on the other hand, typically have a lower maximum borrowing limit, which is usually a percentage of the borrower’s monthly income.

Repayment Terms

Logbook loans offer longer repayment terms, stretching from several months to a few years, depending on the contract between the borrower and the lender. Conversely, payday loans are repaid in full within a short period, usually on the borrower’s next payday or within a few weeks.

Interest Rates

Due to the secured nature of logbook loans, lenders often offer lower interest rates compared to payday loans. Payday loans, being unsecured, generally have higher interest rates to compensate for the increased risk taken by the lender.

Credit Checks

Logbook loans require a credit check as part of the application process since the borrower’s credit history can influence the interest rate and loan approval. Payday lenders, however, may only do a soft credit check, if at all, making them more accessible to individuals with a poor credit history.


Choosing between a logbook loan and a payday loan ultimately depends on your financial situation. Logbook loans are more suited for individuals who own a vehicle and require a higher loan amount with longer repayment terms. Payday loans, on the other hand, are more suited for smaller, quick, short-term borrowing.