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Logbook loans: All you need to know

Emphasis on having a good credit score have indeed narrowed down options for UK citizens seeking to have a loan whilst having a poor credit rating. With the global credit crunch that hit the world a few years back, financial institutions and lenders have tightened the noose and are now stricter when it comes to approval of loans. The resultant effect is that UK citizens have seen their loan applications declined than they could care to count. Getting approved for a loan from a high street bank has become more difficult than ever.

It’s perhaps for this reason that the introduction of logbook loans into the UK market was wholeheartedly embraced with two hands especially among UK individuals that had bad credit. Logbook loans are essentially a secured form of loan where ones car is used as collateral. Unlike other types of loans, logbook loans are designed for individuals with a poor credit rating. It doesn’t matter how bad your credit score is or how many times you’ve defaulted in your loans in the past. So long as you are a UK citizen, 18 years of age and above and legally own a car registered in your name, you are eligible to apply for a loan. The requirements are that basic and simple.

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Do you need to supply your lender with additional documents?

Yes. In addition to the above mentioned requirements, there are a number of details or documents that you need to furnish your lender to fast track your logbook loan application. These are:

  • Ministry of Transport (MOT) certificate
  • Insurance and tax details for your car
  • Bank statements
  • Provide proof that you receive regular income
  • Provide proof of where you reside (address)

What kind of car is required as collateral?

Basically, UK logbook loan lenders generally accept all types of cars as collateral. However, there is an exception. The car you bring forth as security should be in good condition and this is why you are required to provide the lender with a MOT certificate. Secondly, the car should not have any form of financing attached to it. If your car meets these two conditions, you can use it as collateral irrespective of the brand or model.

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How long does it take before you can receive the logbook loan amount?

Basically, most UK lenders will tell you that the time you have to wait before you receive the cash is dependent on you. If you furnish the lender with all the required details and documentation, you can have your loan processed within hours. However, if you don’t do that, the period might be slightly longer than 24 hours. The onus is therefore on you to ensure that your lender has everything they need to facilitate the loan in the fastest time possible.

To apply for a Simple Logbook Loan, all you need to do is locate a lender you are comfortable doing business with. With so many lenders to choose from, it is highly recommended that you do proper research, do comparisons, read reviews, read past customer testimonials, take into consideration APR and make an informed decision!

 

Questions to ask prior to getting a loan

The undeniable fact is that people apply for a loan for a variety of reasons. There are those who apply for a loan for the purposes of debt refinancing, others apply to inject capital into a business, others to finance higher education and so on and so forth. What we can’t run away from is that at some point, we might need a cash injection and there is no better way to go about it than to seek for a loan from high street bank or financial lender. However, prior to getting a loan, there are a number of questions that you need to ask.

What is the loan application process?

This question is very important as you need to know how long it will take you before you get access to the cash you badly need. Is the loan application process simple or strenuous? What is the standard period you need to wait before the bank can avail the loan amount to you? This is essential to mentally prepare you and give you a rough idea of how long it will take before you get money.

What is my credit score and how will it affect my loan application process?

The truth of the matter is that your credit score affects the cost of the loan as well as the ability to get approved for a loan. You need to check your credit score prior to applying for a loan. This is instrumental so as to take proper measures to raise it in the event that it’s low. Sometimes, your credit score could be low because of some errors and therefore it’s essential that you look into this prior to getting a loan. A good credit score increases your chances of approval without need to pledge any asset as security.

Is this secure or unsecured loan?

Depending on your credit score, you can apply for secured or unsecured loans. Long term loans require that you pledge an asset as security while short term loans might not require you to pledge any asset as security provided that you have a good credit score. In essence, a good number of personal loans do not require collateral but it is highly advisable that you ask rather assume.

What is loan interest rate?

This question is very important as it gives you an idea of the overall cost of the loan. Is the interest rate too high? Asking this question gives you an opportunity to compare the rates offered by other lenders and applying with one you feel the interest rate is acceptable or relatively cheaper. The interest rate determines the amount of money you will eventually repay and therefore it is very important that you ask your lender prior to getting a loan.

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What is the loan term or repayment period of the loan you are about to take?

Repayment period simply refers to the amount of time you are required by the lender to repay the loan. In essence, a shorter repayment period means the monthly payments will be higher while the vice versa is also true.

Is there a penalty for early repayments?

There are times you might get some cash and might wish to clear your loan in the fastest time possible. There are a number of lenders that penalize you for prepayments and therefore it’s highly recommended that you ask in advance if there are penalties if you clear your loan early.

What happens if I default on payments?

Financial circumstances can change in a whim and therefore it’s highly recommended that you ask your lender what would happen in the event that you are unable to make repayments as earlier agreed.

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Factors to consider prior to applying for a loan

Taking out a loan is not a simple matter and therefore should be treated with the seriousness it deserves. Let’s face it. A loan can be the cause of all your problems especially when you casually apply for it without taking proper measures to understand everything about it. A loan cannot be applied at a whim. Essentially, we have secured and unsecured loans and the onus is on you to decide which among the two you are more comfortable with. Secured loans require collateral before you can be approved while unsecured loans do not require any collateral. That notwithstanding, there are a number of things you need to take into consideration prior to applying for a loan.

Loan term

Depending on the amount of loan and your lender, the loan term can be anywhere from 5 years to 30 years at most. It is essential that you settle for a loan term that is comfortable with you and which you feel won’t strain your finances. Additionally, you need to ask your lender whether there is an option for early repayment or if the loan term can be adjusted in the foreseeable future. If the loan term can be adjusted in the foreseeable future, it is imperative to ask your lender how the same will affect your interest rates or the amount you repay monthly.

Interest rates

Of course, this is one of the most important factors you need to take into consideration prior to applying for a loan. Don’t fall into attractive advertising. While cheap interest rates might be tempting, it could also mean that you will end repaying the loan for a very long period of time. You therefore need to look at the interest rate being offered in respect to the loan term and if it’s reasonable, go ahead and apply for the loan.

Fixed or floating rates

Back in the day, loan applicants only had to deal with fixed interest rates. This is where you know exactly the amount of money you will be repaying throughout the term of the loan. What this essentially means is that interest rate is fixed and won’t fluctuate throughout the loan term. In recent times, you must have noticed the rise of floating adjustable interest rates which essentially means that the interest rates on your loan are not fixed but change with changes in the economy. Depending on the terms of the loan, the interest rates may vary quarterly or annually and therefore you might end up paying more or less interest depending on the performance of the economy.

Hidden charges

Many people are so anxious to sign on the dotted line and get access to the money they need without scrutinizing the fine print for any hidden charges. This is highly discouraged as you might end paying more than what your lender told you when you were applying for the loan. Take the necessary measures to ensure that you read the fine print and understand any penalties, charges for early repayment, and so on and so forth. You don’t want to wake up one day and realize that you got a raw deal!

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The merit of Secured loans

The undeniable truth is that every once in a while, a person may need a cash injection that can only be availed through a loan. There are times when we need to start a business, pay off debt, pay higher education fees but simply lack the finances to accomplish our objectives. When this happens, seeking for a loan from high street banks or mainstream financial lenders seems like the plausible thing to do. A spot check across the UK and you will notice that scores of individuals resort to taking out secured loans for the purposes of securing the much needed extra capital. While secured loans are the most preferred, there are indeed several other ways in which a person can get access to that extra capital they badly need. Why is it highly recommended to go for secured loans as compared to unsecured loans? If you are curious or simply want to make your decision from an informed perspective, kindly read on.

Unsecured loans

From the sound of the name, unsecured loans refer to loans where an applicant can apply and be approved without the need to pledge any security. In essence, with unsecured loans, you do not need to have collateral before the lender can approve your application. What this means is that in the unlikely event that the borrower fails to repay the loan, the lender does not have the luxury of going for the borrowers fixed assets to recoup the loan amount as would be the case with secured loans. Well, at first sight, this might seem like the better option considering that none of your assets will be at risk. The downside is that considering the high risks with unsecured loans, lenders tend to push up interest rates making it more expensive than secured loans. The reality of the matter is that it is easy to find cheap secured loans but you can never find cheap unsecured loans.

So why should you go for secured loans as compared to unsecured loans? Well, if you reside in the UK, you will agree with me that getting approved for unsecured loan when you have bad credit is a tall order. In fact, it is an impossibility, an exercise in futility on the part of the borrower. This is where secured loans save the day for those with bad credit. Essentially, if you have an asset you can pledge as security, you are more likely to be approved for a secured loan even if you have bad credit. Lenders are usually more than happy to extend credit to people with bad credit so long as they have the assurance that should things go south, they have a way of recouping their money. In this regard, if you have collateral, you will get access to loan facilities even if you have a poor credit rating.

 

The interest rates for secured loans are also relatively cheaper as compared to unsecured loans. The availability of collateral means that the risk on the part of the lender is lower and therefore the availability of better loan terms. While unsecured loans might be attractive, the cost of the loan in itself is a major stumbling block. If not careful, unsecured loans can plunge a person deeper into debt especially with the high interest rates that makes the overall cost of the loan very expensive. It is important that you seek for credit for an amount you easily repay and resist the temptation go for incredible amounts of money simply because you have the collateral. Prudent loan application is highly recommended!