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Logbook loan facts

From inception, logbook loans have been marred with misconceptions and skewed fallacies. You simply need to scour the internet to fully appreciate the extent of the misinformation. If you are thinking of applying for a logbook loan for the first time, it is essential that you understand logbook loan facts with the sole aim of making an informed decision. With that said, let’s take a look at a number of logbook loan facts that you should be familiar with.


Logbook loans are secured loans

Those telling you that you don’t need security when applying for a logbook loan are simply misleading you. In fact, logbook loans can be aptly compared to secured loans. You need to set up your car as collateral for the entire period of the loan. When applying for logbook loans, you simply sign off ownership of your car to the lender for the determined period of the loan. In other words, you cannot qualify for a V5 loan if you do not own a car that can be used to secure said loan.

Your credit history is a non-issue

The need for an excellent credit history is crucial if you want to improve your chances of approval and minimize rejections when applying for a loan. However, that is not the case when it comes to logbook loans. Your credit history does not in any way negatively affect your chances of approval from lenders who offer logbook loans 24/7. Irrespective of how bad your credit score is, you can always be assured of approval when applying for a V5 loan provided that you show that you can repay the loan.

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The car to be used as collateral must not be attached to any other loan

In essence, you can only use a car that is free from any financing as collateral for a logbook loan. If it has any attachment to an already existing loan, logbook lenders will reject your application. In addition to that, the car must be in good condition, serviced on a regular basis and its insurance, as well as tax details, must be in order.

A car, van, caravan or even motorcycle can be used as collateral for a V5 Loan

The fallacious belief is that only a car can be accepted as collateral when applying for a V5 loan. However, this is nothing more than a rumour as you can also use a motorcycle or even a commercial lorry as collateral provided that they are in good shape and the amount you seek is not more than 50% of their current market value.

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A sneak peek into the pros and cons of secured car loans

A secured loan simply refers to a loan instrument where collateral is needed prior to loan approval. In essence, when we are talking about a secured car loan, we simply mean that the borrower must set up their car as collateral or any other asset prior to being approved for a loan. The lender can seize or repossess the car and sell it off should the borrower default on loan repayment. While the idea of losing one’s car in case of default doesn’t sit well with most people, the truth of the matter is that a secured loan isn’t as bad as many might want to believe. With that said, what are the merits of a secured car loan and why should a person consider applying for a secured car loan?

Interest rates are slightly lower compared to unsecured loans

The thing about secured loans is that it greatly reduces the risk on the part of the lenders and as a result, they tend to apply lower interest rates. The security gives lenders the guarantee of money back should the borrower be unable to meet loan obligations.


Flexible requirements as well as flexible rules

Granted that the lender has guarantee in case of a default and in full understanding of the fact that risk is greatly minimised, lenders tend to relax requirements prior to approval of a loan. A requirement such as the need to have an excellent credit score might be overlooked if the borrower sets up collateral. What this essentially means is that you might be approved for a loan even if your salary is not that high because you have provided the lender with something to fall back on should you be unable to furnish your loan.

Cheap monthly repayments

The provision of security means that a person will be able to enjoy cheaper monthly payments because of the risk reduction on the part of the lender. In case of default, the lender can always seize the asset pledged as security and recoup their money.

Low credit score individuals can still apply and get approved for this kind of loan

In the absence of collateral, getting approved for a loan when someone has a low credit score is an uphill task. In fact, most lenders rarely look at applications emanating from bad credit individuals twice. However, with secured loans, the playing field is levelled as even those with a low credit score can apply and get approved provided that they have collateral to pledge.


And what are the cons or demerits of secured loans?

For one, let’s not beat around the bush. The reality of the matter is that you stand to lose your asset should you be unable to repay your loan as set out in the contract with your lender. Secondly, your credit score will suffer a beating should you miss payments on a number of occasions!

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Key questions you need to ask before applying for a loan

Granted, there are a myriad of reasons as to why people apply for loans. There are those who apply for loans to refinance an existing debt, others apply for a loan to buy machinery or buy land while others still want to go for a vacation or simply to finance an upcoming wedding. Whatever the reason for applying for a loan, it’s prudent to do it with your eyes open and from an informed perspective. With so many rogue lenders who find satisfaction in hidden charges and swindling borrowers of their hard earned cash, you cannot afford to be complacent. In that regard, it’s essential that you ask a number of questions prior to applying for any given loan be it secured or unsecured.


What is my credit score?

The approval or rejection of your loan is largely dependent on your credit score. The higher your credit score, the better the loan terms not to mention ease of approval. On the other hand, the lower your credit score, the more difficult it is to get approval not to mention higher interest rates that will be slapped on your loan if you are approved. It is therefore of the essence to know your credit score status and take measures to improve it prior to applying for a loan.

What is needed in order to be considered for a loan?

The fact of the matter is that there different requirements for different types of loans. On the same wavelength, different lenders have different requirements. For some loans, the income you receive monthly as well as the state of your credit score is enough to get access to a loan. For others, stringent requirements such as copies of tax returns, bank statements, land title deeds, the number of assets you have, among other things, are required before you can be considered for a loan. It is, therefore, important to be know of these things before you set out to apply for a loan.

What is the standard loan application process?

This is a very important question as it gives you an idea of how long it will take before your loan is approved, the period of time before money is reflected in your bank account, what you need to furnish the lender with prior to approval and so on and so forth. Understanding the loan application process gives you an idea of the standard period you will have to wait before you receive cash that you are borrowing.

What is the interest rate applicable to the loan?

The interest rate attached to a loan gives you an idea of the total cost of the loan and how it will affect your finances going forward. It is therefore important that you be familiar with the annual percentage rate (APR) to help you make an informed decision. Generally, a higher APR means the total cost of the loan will be higher as compared to a lower APR. It is therefore important that you put the APR into consideration prior to applying with a given lender.


What is the period of repayment?

Without a doubt, the loan repayment period is going to affect your budget or rather your finances going forward. It also affects the exact amount of money you will part with on a monthly basis after securing the loan. A long repayment period means you will have lower monthly payments and vice versa. On the downside however, a longer repayment period means that you will be committed to a loan repayment for an extended period of time and therefore pay more interest.

What is the worst case scenario should I be unable to furnish my loan?

You definitely want to know the applicable fees, charges as well as penalties for non-repayment not to mention the inability to pay should the unexpected happen.

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Unsecured vs. secured loans – which one should you go for?

When seeking to obtain a loan, one thing that is for sure is that you will have to choose between a secured loan and unsecured loan. In fact, all different types of loans are categorised into two broad categories – unsecured loans and secured loans. The most outstanding difference between a secured loan and an unsecured loan boils down to interest rates. Generally, unsecured loans attract higher interest rates as compared to secured loans. The reason behind this is because unsecured loans are considered risky by lenders due to the absence of collateral and therefore to mitigate the risks, high-interest rates suffice.

Secured loans

From the sound of the name, secured loans generally mean that you have to pledge an asset before you can be considered for the loan. In simple terms, you borrow money against the value of the asset you pledge as security. In other words, lenders are more likely to approve your loan when you pledge an asset as security even if you have a poor credit rating. Given the fact that there is collateral involved, secured loans tend to be relatively cheaper when compared to unsecured loans. On the other hand, you stand to lose the asset you pledged as security should you be unable to repay your loan. In other words, you can lose your home, your jewellery, or even your land should you be unable to repay your secured loan.

Unsecured loans

As the name implies, this is a loan instrument that does not require pledging any asset as security. Unsecured loans have a short-term repayment period as compared to secured loans and tend to be more expensive compared as well. Lenders tend to charge high interest rates as a way of cushioning themselves in the event that the borrower fails to repay the loan as earlier agreed. The best example of an unsecured loan are payday loans where a person is required to fully repay the loan on the next payday.


Circumstances under which you should go for either secured or unsecured loans

If you are thinking of applying for a loan, you probably are in a dilemma as to whether to go for a secured or unsecured loan. Well, if you only need a small amount of money that is repayable within a couple of months, it would be foolhardy to go for secured loans. Simply put, it is not prudent to risk your home or even your car over a small sum of money by going for a secured loan. On the other hand, if you need a huge sum of money for say business expansion purposes or to buy machinery, going for secured loans would be the perfect thing to do. Unsecured loans offer relatively small sums of money as compared to secured loans while the interest rates are also very high. Secured loans will give you the much-needed money at affordable rates and a prolonged repayment period.

In conclusion, it is important to be prudent when choosing a lender irrespective of whether you want a secured or an unsecured loan. Choose a reputable lender that adheres to a professional code of conduct, offers affordable interest rates and is genuinely concerned with the welfare of its customers!




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