Logbook loans – how do they work?

Lately, we have received more and more queries about logbook loans. These are becoming a popular source of credit for people who have paid off their vehicle and can now use it as collateral on the loan.

A logbook loan works in a very simple manner. Basically, you are able to secure a loan against the value of your vehicle, be it a car, a motorcycle, caravan or truck.  Loan applications are quick and simple and money can be in your bank account within 24 hours.

So how do logbook loans work?

Well, if your vehicle is paid off, it is a valuable asset, especially if you have kept it in good condition. To apply for a logbook loan however, there are a few things you need to consider.

  • You must be the registered legal owner of the vehicle. It cannot belong to your wife, parents, friend or sibling. If it does, they must apply for the loan. You will be asked to provide proof of ownership when applying.
  • The vehicle must be fully paid up. No vehicles under a finance plan can be considered for a logbook loan. Why? Well, during the duration of the loan, the loan company effectively owns the vehicle, so if it still had finance on it, this would not be possible.
  • You need full and comprehensive insurance. This covers the lender in case you damage the vehicle in an accident during the terms of the loan. It also protects from theft and weather damage.

To secure an amount of money paid into your account, your vehicle needs to be assessed. The loan amount is then based on that assessment but is never more than 50% of the value of the vehicle. You will need to provide a number of documents during your application including identity, proof of address, payslips, bank statements and the MOT certificate of your vehicle.

Most loan companies will allow you to apply online but bear in mind they will have to see your vehicle to assess it. Once approved, the money is paid into your account in no less than 48 hours.

Visit logbook loans UK for more information on this versatile loan option.

APR – What you need to know

Many people, when under financial pressure and needing money in a hurry simply blunder their way into a loan product and end up paying the price when it becomes difficult to pay back the installments each month.

Unfortunately, this is as a result of them not doing their homework properly and not understanding various critical factors pertaining to credit. One such factor is interest rates. This determines how much interest you will pay on top of the original loan amount.

In this article, we will be taking a look at annual percentage rate (APR) in particular.

Definition of APR

Anyone that borrows money from a credit provider has an interest rate which is then applied to the amount that has been borrowed. This is added to the total amount which needs to be repaid and is the main way that these companies earn money. This interest is the APR. It is calculated as the amount of interest charged annually on the borrowed amount. It cannot be done away with and is something that will have to be paid.

Can APR change?

Yes, it most certainly can. In most cases, different financial institutions charge different APR ratings for their products. You could even take two of the same loan product from two different lenders and you will find that the APR is not the same. The APR rate is often set by the financial lenders themselves.

The representative APR rate seen in advertising for a credit product is the general rule of thumb of what most people will be charged. Each individual application however, is unique and the APR may go up or down depending on the applicant’s risk to the lender. Someone with a poor credit record and a history of missed payments might have a higher APR than the representative rate while someone who makes their payments regularly might actually receive a lower rate.

What affects APR?

The most important thing that affects the APR is each individual applicants credit score. As explained above, poor credit scores mean higher APR’s than good credit scores. That’s why it is so important to try and keep your credit score in a decent range.

Calculating APR

If a lender tells you the APR they intend to apply to your loan, it is possible to calculate how much it will cost to borrow money from them. So an APR rate of 5% on a loan of 1000 pounds means you will pay back 1050 pounds over the term of the loan. APR can be influenced in the following ways. Firstly, by paying back extra each month (more than the instalment) and secondly, by how long you take to pay the loan off. Check to see if you will be penalised for paying the loan off early, however.

Making repayments

Always make your repayments on time and pay the full amount. This amount will in all likelihood be fixed if you took out a fix rate loan. By paying even 10 pounds more a month, you could pay off your loan quicker, thereby saving on interest. As mentioned above however, make sure this is allowed by the lender without fear of penalties.

The difference between secured and unsecured loans

Many people needing to lend money simply jump at the first loan option they see. Unfortunately, they do not take the time to do a little research to find the best loan option for them. Sometimes, this can get them further into financial trouble, especially if the loan they end up taking out is not suited for them.

And there are so many options available, it is easy to get completely bewildered, even if you have done a little bit of research. That’s why websites like ours exist – to try and help you make the best-informed decision you can when searching for the right credit product for your unique circumstance. Also, it is important to bear in mind that many lenders simply do not care about borrowers. These unscrupulous people are only interested in the money their loan products will bring in.

Perhaps the best place to start when deciding on the best loan option is to decide between the two major loan types available. These take the form of secured and unsecured loans. In this blog, we will look at both in detail, highlighting differences between the two.

What is a secured loan?

Many financial institutions in the United Kingdom offer secured loans as a lending option to the public. When applying for this type of loan, a lender must have some form of collateral to offer as security on the loan. This could be something like your house, your vehicle or an expensive piece of jewellery. The value of the security that you offer certainly plays a major part in how much money you can borrow along with your monthly income, expenses and any other debt you might have against your name.

The collateral is a crucial part of the loan. If a borrower doesn’t pay their instalments the lender may sell off the security to recoup any costs they may have suffered. That’s why it is important to always pay your instalments on time and with the full amount.

Note that secured loans are usually for fairly big amounts based on the collateral offered. Also, interest rates can be fixed or variable while the loan is often paid back over a number of years but usually no longer than five years.

Unsecured loans

Unsecured loans are very different to secured loans in the fact that a lender needs no form of collateral to apply for one. They are generally also for far smaller amounts with a fixed interest rate and repayment term. This means that from the first month to the last month in which you make your final payment, the amount will not change at all. If you signed a contract that says you will pay 100 pounds a month, that is what you will pay for the duration of the loan. If it changes, make sure you contact your loan provider as even if the prime lending rate changes, your loan instalment should not.

These loans are often taken out when people need cash fast, for example in emergencies. You may need an urgent medical procedure or perhaps a wall collapses in your home that needs to be fixed. This is where unsecured loans come into their own mainly in the fact that approval is fast – usually within 24 hours. Bear in mind however, APR interest rates for these loans are very high. This is mainly due to the fact that the lender has no collateral to fall back on should someone default on their payments.

Do your homework and stay up to date with loan news

If you are looking for a loan it is important that you do not jump at the first option you find. It understandable that in times of need, you might just rush into taking the first loan you see. Take your time, compare options and above all, read the fine print as well as the terms and conditions.

Often, the amount of money you need will go a long way to determining the type of loan you should be aiming for. Some loans however, are perfect across a range of amounts, for example, a logbook loan can secure anything from 500 to 50 000 pounds depending on the condition of your vehicle.

Be prepared and you won’t be caught out.

Unsecured loans – Making sense of all the options

If you are in need of a loan, no doubt that you have done your homework and found many options that you could choose from, especially in the unsecured loan market. These loans have quickly become very popular and will continue to grow as more and more people turn to credit during tough financial times.

Well, that and the fact that even if you have a bad credit rating, you could still qualify for such a loan. This really makes them more and more attractive to the public of the United Kingdom.

The other plus point is that you simply do not need any form of collateral to secure one of these loans. Well in most cases that is. For a logbook loan, your vehicle acts as collateral. Finally, people turn to these loans because they are simple to apply for and you will receive an answer to your application in a matter of a few hours. No waiting for a week only to get turned down like a conventional loan.

So what kind of unsecured loan options are available to the public in the United Kingdom? There are many. Remember, these loans also remove regular financial institutions like high street banks right out of the picture. Note, loans come with different interest rates, often depending on the loan option that you choose. Let’s take a closer look.

Payday loans

Although these loans are readily available, they should really be a last resort. Why? Well, they have some of the highest charges of all the unsecured loans (sometimes with APR ratings of close to 1000%) and they are generally only for small amounts of money. Once you have borrowed the money, you must pay it back by your next payday otherwise you will incur massive penalties.

Guarantor Loans

With this loan, the lender needs someone to act as a guarantor on their behalf. What is a guarantor? Well, it is someone who will co-sign the loan for you. Should you then miss any payments, it is the guarantor’s responsibility to make those payments you have missed. This provides the lender with peace of mind knowing that if one party reneges on a payment, the guarantor is legally bound to step up and pay on their behalf. Bear in mind, although you might have a bad credit standing, any guarantor that co-signs must have a good credit record for the loan to be granted. Guarantor loans often have better terms than other unsecured loan types because of this.

Instalment loans

An instalment loan is pretty straightforward and perhaps how everyone thinks all loans work. Here, you agree on the amount, interest rate, instalment and length of payment with a financial institution. They give you the amount agreed upon and you pay it back in monthly instalments of a set period, for instance, 36 months. Interest is added and that needs to be paid back as well.

Logbook loans

Logbook loans are for borrowers who have their own a motor vehicle, truck or motorcycle. Here the vehicle acts as a form of security. If the person stops making their monthly repayments, the lender, who is the legal owner of the vehicle during the course of the loan, may claim the vehicle to be sold to recoup any costs. The condition of the vehicle, as well as the monthly income of the borrower, is crucial in determining how much money will be borrowed to the applicant by the lender. Note that the vehicle must be fully paid off as well as comprehensively insured before any logbook loan is given to an applicant.