In a time where borrowing money is easier and more common than ever, it can still be difficult to find loans for bad credit. If you’re in that situation, it can feel like no one is willing to help.
But there are opportunities available to get a foot on the lending ladder with loan companies who are prepared to offer a secured loan.
One of the most popular loans for bad credit around at the moment is a logbook loan and to apply, all you need is your own car and your V5 (or ‘logbook’) document.
Using your car as security, your approved loan amount is based on the value of your car and paid back over an agreed period. But finding the best logbook loan provider can be tough, so here are five pointers to help you:
1. Get a fair rate of interest
There are many unethical logbook loan lenders who charge unjustified rates of interest. Shop around and you’ll find lenders who offer APRs that are almost half of other lenders and who won’t charge you additional interest from unfair tie-in periods and other fees and charges.
2. Do they require a credit check?
We’re looking at loans for bad credit, so if a logbook lender requires one, then steer clear. A credit check takes place when you apply for any loan and it remains on your credit file for many years.
It could affect your credit score and your future ability to borrow, so choose a lender who doesn’t require any formal credit checks.
3. Make sure there are no hidden fees or charges
Some lenders won’t tell you about their fees or charges, preferring instead to keep quiet about them and bury them in the small print. These hidden charges will then be added to your loan, so payments can quickly escalate.
Choose a lender who tells you up front about any fees or charges that you could incur along the way. You may need to read the fine print and clarify with the loan agent but make sure you understand any fees.
4. Can you settle your loan early?
Always check to see if any lender charges for the privilege of paying your loan off early. Some lenders have a three-month minimum period before you can repay the loan, so you’re needlessly paying interest before you can repay in full. Don’t be penalized for wanting to settle early.
In most situations, it is better to pay off loans early. If you can eliminate your debt as quickly as possible, you will save money. Always make sure that you can pay off your loans early without penalty to help you build wealth faster.
5. Can I pay weekly or monthly?
Many lenders limit you to repayment terms that suit them, not you. You should only choose a lender that will give you the choice of weekly or monthly payments so that it matches the way you receive your own income. Don’t accept a repayment term that will put you in financial difficulty.
6. Shop around for the best lender
Don’t go with the first lender that is willing to give you a loan. You might be tempted if you need the money quickly, but take some time to compare loans. You may be able to find a better interest rate by comparing a few different lenders.
For example, credit unions often have better rates than normal banks and may be able to provide a personal loan. Saving even a few tenths of a point in interest could add up to hundreds of dollars in interest avoided.
