A comprehensive logbook loans guide will provide crucial information that you should know before you take on a logbook loan. This type of loan can be very useful, but you must be careful when taking out this type of loan. The interest rates are high, and you could lose your car if you don’t make regular payments.
Tip 1: Look For Fees
Most logbook lenders are straightforward in their dealings with their customers. That being said, there are also those who are unscrupulous, looking for ways to make extra money tagged on to each loan. This is most often done with either a floating interest rate or through fees.
Before you sign a contract with a lender, ask about fees included in the contract. Some lenders will charge you a fee with each payment they process. This is ridiculous, since you have to make payments, and they are in the business of accepting them. However, this fee is often present, and will be added to your balance. This means that you pay interest on the fees as well as the original loan.
Another fee you may pay is for early repayment of the loan. It is not uncommon for the lender to penalize you for early repayment, because they make their money through interest accrued over a period of months. Early repayment takes money out their pockets, so that want to get it back. If they do not charge you a fee, they may charge you the rest of the interest that you would have paid, anyway. This often defeats the purpose of early repayment, which is to shorten the repayment time in order to decrease the interest.
Tip 2: Negotiate Interest
In the UK, logbook lenders must offer the APR to just over ½ of their customers. However, once they reach that quota, they may set the interest rate however they wish. This leads to astronomical interest rates, which almost always can be negotiated. If you are a repeat customer, you should be able to get a much lower interest rate than you did on your first loan with the lender, especially if you repaid your loan as agreed.
Another problem with interest arises if you miss a payment, or are late with a payment. In many cases, you lose the lower interest rate, and are automatically charged a much higher rate for the remainder of your loan. Your lender should make the terms perfectly clear to you, so that you make no mistakes.
Tip 3: CCTA Membership
Lenders who are members of the CCTA, or Consumer Credit Trade Association, have agreed to abide by a code of conduct that is more strict than the law requires. These lenders are usually more careful to be sure that their potential clients can afford to repay loans, creating a better situation for both borrower and lender.
These three tips from a logbook loans guide can help you select a reliable lender.