The best loan APR, the best personal loan to get with a good interest rate and what an APR loan is anyway.
The best loan APR, the best personal loan to get with a good interest rate and what an APR loan is anyway.
First lets start by explaining what an APR is anyway and how it applies to loans, APR stands for Annual Percentage Rate and it means the amount of interest that your paying each year (annually), so I need to explain what interest is too, interest is the cost of borrowing money, a company (known as a lender) wonít want to lend you (the borrower) money without making a profit, this profit is called their interest, if you like to think of it this way, the profit is the lenders interest (thing they are concerned about).
So APR is interest, the higher the interest rate the more your loan costs you because the interest is a percentage of the loan value, as a quick example, if you borrowed £1,000 and your APR was 10%, each year you pay 10% on the outstanding loan, so £1,000 + 10% = £1,100 which means that borrowing £1,000 costs you £100 if you borrow the money for one year.
But look what happens if you borrow the money over two years, because APR is the annual rate of interest and our example used 10% APR that means that the total interest charge is 20%, so £1,000 + 20% = £1,200 which means that the cost of borrowing has just doubled because you have doubled the amount of time that you have the loan for.
Now, different lenders will calculate interest slightly differently, if the annual APR is calculated on just the amount outstanding each year, then your save yourself money, so itís a good question tom ask any lender, how do you calculate interest? Do you calculate interest repayments monthly, quarterly or yearly, a monthly interest rate calculation will be cheaper as it takes account of every loan repayment you have made and lowers your remaining loan repayments by taking into account the repayments made to date.
Whilst you can work out how much interest youíre be charged for a specific APR, as a quick check just look at the APR value, as itís a percentage the lower the number the less interest your be paying, unsecured loans like payday loans and personal loans will always have a higher rate of interest because the risk to the lender is higher.
The reason an unsecured loan has a higher APR is because with an unsecured loan the lender must hope that you will pay back the money that you have borrowed, if you donít pay back the money that you owe then the lender would have to take you to court to get you to repay and if you have declared bankruptcy (IVA) Individual Voluntary Arrangement, then the lender will only get back a small proportion of the money that they have lent you, so the lender will always regard an unsecured loan as a greater risk to their money.
To lower the risk the unsecured lender will want to make sure that they only lend to someone who is likely to pay the loan back and the way the lender makes sure of that is by checking your credit score with Experian or Equinet or another credit reference agency, if you have always paid your bills on time and if you have always paid back any loans or leases on time, including furniture, carpets, kitchens and other household Ďbuy now, pay laterí schemes then your likely be offered an unsecured loan, if you have paid a bill late or made a repayment late then the company that you should have paid on time like your car payment, washing machine payment or other bill company will inform the credit reference agencies that you have failed to pay a bill on time and your credit score will be lowered.
So unsecured loans are easier to get if you have a good credit score and a lot harder to get if you have a bad credit score, with a bad credit score if an unsecured lender decides to offer you a loan it will be at a very high rate of interest as the lender will be wanting to make more money from you quickly, as the lender knows your previous credit score says you are likely to not pay the loan back in full.
The opposite of an unsecured loan is a secured loan, this is when the money borrowed is guaranteed against something of value, in the case of a logbook loan the loan is secured against your cars value, that means a logbook lender is less worried than an unsecured lender that you wonít pay the money back because ultimately if you donít repay a logbook loan then the lender could repossess and sell your car to get the money that they have lent you back.
For this reason, the amount of money that you can borrow with a logbook loan must always be less than the value of your car, if the lender had to sell your car for loan repayment they would want to know that your car is worth the amount of money that they have given you as a loan.
Youíre be able to borrow 80% of your cars value, so if you wanted to borrow £1,000 then your car must be worth at least £1,200, the minimum you can borrow is £250 and the maximum value is £50,000, any car can be used for a logbook loan as long as its UK registered by the DVLA, that means you have a V5C certificate from the DVLA that lists your name and address as the registered owner of the vehicle, the vehicle can be any car, motorbike, van or truck, you donít have to be a UK citizen, your car should just be UK registered.
Itís easier to get a secured loan (logbook loan) than it is to get an unsecured loan because the lender knows that your car has value against the loan, this means that youíre more likely to be offered a logbook loan if you have bad credit because its not just your credit score that matters to the logbook lender, but also your cars value and your ability to repay the loan.
Whilst the maximum amount of money you can borrow with a logbook loan is £50,000 that doesnít mean that you can borrow that much money with any car, your car will need to be worth the amount of money that you want to borrow, any car can be used for a logbook loan, you might have a Ford, Vauxhall or a Jaguar or Rover, whatever you drive youíre be able to get a loan against your cars value.
Your need to make sure that you can make the monthly repayments, when you apply online your given a loan quote, the loan quote will list the APR, loan term (how long you have the loan for) and how much you want to borrow, you can change the amount you want to borrow and how long you want to borrow the money for, on the logbook lenders site, this will then change the cost of borrowing the money.
The logbook lender will want you to be able to make the monthly repayments as they have lending criteria they must adhere too, itís not in the lenders interest to repossess your car and actually the lender loses money because if your car is repossessed and sold at auction for 80% of itís list (second hand value) price the lender will be missing out on interest payments that you would have made if you continued with the loan and repaid the full loan amount.
Your need to have the cars logbook (V5C form) from the DVLA, this form will have been sent to you when you purchased the car (or van, truck or motorbike) and will list your name and address, if the details are wrong because for example you have moved house, then your need to inform the DVLA so that they can send you a new V5C vehicle registration document as if the V5C details donít match your details the logbook lender wonít be able to give you a logbook loan.
You can contact the DVLA with a Ďchange of addressí request if for some reason your V5C car registration document is old, your also need to have an income that allows you to make the monthly loan repayment, that income might be from a regular job either full or part time or it might be from benefits like disability or unemployment benefits, just because your not earning much money doesnít mean that you will be denied a loan, taking the loan out for a longer period of time will reduce the monthly loan repayment to make it more manageable, but over the life of the loan a longer loan term means you pay more (just less each month).
You can use a logbook loan for anything you like, there are no limitations set by the logbook lender, you might want a loan to finance your wedding or finance a luxury holiday for you and your family or to get private medical care or to pay school fees or start a new business, a secured lender wonít lend you the money if they donít like your reasons for getting the loan because an unsecured loan is a loan against you personally and so if your seen to borrow money for what an unsecured lender regards as Ďa crazy ideaí, your be refused.
You can check if your eligible for a logbook loan by getting a loan quotation, this quotes a specific APR for you personally, based on your cars value and details about you, the quote normally lasts for three days which means if you wait more than three days before coming back to the logbook lenders site and completing the loan application you wonít get the same APR, if the cost of borrowing has gone up in that time then your loan quote will require a slightly higher amount of money to be repaid, so if when you look at the loan quote on screen, if your happy to proceed then do so to lock in the APR rate that you have been given.
If you want a logbook loan but have a loan against your car already, either a Hire Purchase agreement from when you bought your car or some other lease or loan arrangement then you can still take out a logbook loan on your car but your need a debt consolidation logbook loan to do it, this special type of logbook loan pays off the HP or car lease or other logbook loan already on the car and leaves you with enough money over to use as you see fit, then each month your make one loan repayment which will have a lower APR than your old high interest loans so your be saving money.
With a unsecured loan the loan quote will say representative or example APR, what this means is that the loan quote you have been given is not personal to you, but a standard rate that a Ďstandard personí would be given, if your credit score is not the highest (the Experian credit score range is 330-830 and the Equifax credit score range is 280-850), then your find that the loan your eventually offered after you apply (not the APR written in the loan quote) will be very much higher, in fact you can find that you are given an unsecured quotation with a standard APR and then when you apply for the unsecured loan your actually rejected, thatís because the example APR loan quote was not actually an offer for you, just an advertising leaflet.
If you want to find what APR rate you will be given without harming your credit score then a logbook loan quotation will tell you, you donít have to take the loan out if you donít like the quotation.