Key Considerations When Taking out a Logbook Loan

When you have a poor credit history, finding a personal loan you can easily get approved for is going to be a struggle. In fact, you might receive more rejections than approval in the end. This is where alternatives such as logbook loans come handy. With logbook loans, you can have bad credit and still get approved fast. This is because the loan type is specifically offered for people with bad credit problems. If you’re ready to avail the loan, here are key factors to consider if you want logbook loan:

1. Budget

Budget is key when applying for any type of loan. Knowing how much you need and what you can afford will ensure that you won’t borrow more than necessary. Otherwise, you may be putting your finances at risks. When you borrow more than what your budget allows, you’re not only risking increased interest rates and penalties but also vehicle repossession.

2. Loan amount

Whether you need a small amount or a large amount of money, logbook loans may be perfect for meeting whatever personal need you have in mind. With logbook loans, you can borrow money from as small as £500 to as much as £25,000. Some lenders even offer loans up to £50,000. As long as your vehicle’s value meets the loan requirements and your budget is sufficient to handle the monthly repayments, you’re on your way to getting approved for a logbook loan fast.


3. Repayment terms

Repayment terms for logbook loans are not as lengthy as other types of secured loans such as mortgage loans. In most cases, you’ll be given 12 to 36 months to repay your logbook loan. For large loan amounts, this may not be enough. But for smaller loan amounts, the repayment terms offer just enough time so you can make budget-friendly repayments each month. Most lenders let you choose to pay the loan either bi-weekly or monthly.

4. Representative APR

Before you sign any logbook loan deal, it’s important to fully understand the concept of representative APR. APR, which stands for annual percentage rate, is the financial concept used by lenders to advertise logbook loans. When you’re shopping around, you’ll probably see deals with 400% APR on average. The APR represents your loan’s cost inclusive of interest rates, admin fees and other related charges on an annual basis.

It is also important to remember that the representative APR may not be the actual rate you’ll be able to avail. Only a small percentage of borrowers get to avail the rep APR. For the rest of borrowers, you are likely to get charged more depending on your credit score and the current market rates. There are also deals that may offer lower APR. All you need to do is compare your options as thoroughly as you can to find the most affordable deal available in the market today.


5. Repossession

There’s also the matter of repossession to think about. Logbook loans are risky because it is a secured loan. If the borrower is unable to repay the loan, lenders may resort to vehicle repossession to cover for your loan balance. To avoid such a consequence, nothing is more important than planning your loan thoroughly starting from setting your budget and how you intend to repay the loan. As long as you don’t miss any repayments, you wouldn’t encounter any major problem with logbook loans.

Why Secured Loans are Better

There are two main categories wherein most if not all loan types fall into. They are secured and unsecured loans. Secured loans are loans that require a security while unsecured loans do not. If you’re choosing between the two main categories, secured loans may be a better option for a number of reasons. Here are some advantages you can enjoy with secured loans:

Larger loan amounts

With the security requirement, borrowers are able to take out larger loan amounts with secured loans as opposed to the meager offerings of unsecured loan providers. In general, you can borrow from £1,000 up to £150,000 or even more. When it comes to meeting a wide variety of financial needs, secured loans win hands down.

This type of financing comes handy for minor financial emergencies such as overdue bills to major financial expenses like medical-related expenses. You can also take out a secured loan to fund a business start-up or for down payment of a new house. If you’re off to vacation and you need cash, you can also rely on secured loans to save the day.


Longer repayment terms

It follows that secured loans come with longer repayment terms. In comparison with unsecured loans, which usually have repayment terms from 12 months up to 36 months, secured loans can be repaid from a year up to 20 years or even longer. You can repay your loan on a monthly basis. Length of loan repayment will depend on how much you intend to borrow and how much you can afford to repay on a monthly basis. Your lender will offer you several repayment options to consider and choose from.

Lower interest rates

Because of the security requirement, the risks are lower on your lender’s end. This also means that cost of your loan will be more affordable than unsecured loans. Take for instance home equity loans. When you borrow this type of loan providing your home equity as collateral, you’ll likely pay less than 10% in interest rate. If you opt for an unsecured loan, on one hand, the interest may be multiple times more costly. This is because unsecured loans are usually offered for borrowers with bad credit. Since there’s no security involved, the risks are higher on the lender hence the costly interest rates.

What are the potential risks?

There’s no question to the fact that secured loans are more affordable than unsecured loans especially if you have a good credit score. But other than the cost, another key consideration to keep in mind is the risks involved. With secured loans, the only high risks you need to consider is repossession. Whether you put your house or vehicle as collateral, your lender now has the right to recover these assets in the event that you are unable to repay the loan. Repossession is often the last resort for lenders. As long as you are paying your dues on time, there’s nothing to worry about.

Are secured loans still better?

Despite the risk of repossession, secure loans remain a better option for borrowers with good credit and who are looking for a low cost loan to meet a wide array of financial needs. The trick is for borrowers to plan their borrowing thoroughly. If you’re going to take out a loan, a secured loan in this case, you need to make sure that you’re only borrowing what you can afford. You also need to commit to repay your loan on time each month. Otherwise, you are putting your credit score as well as your finances at risks. Either you pay a higher interest rates because of late payments or risk repossession because of missed payments.