Work loans, what are they, how to get a work loan and what are the alternatives.
Work loans, what are they, how to get a work loan and what are the alternatives.
A work loan is when you ask your employer to lend you money, the employer can choose to offer you a loan under their terms or refuse you a loan, for a larger company youíre have to approach the HR or finance departments, generally the loan will be interest free from your employer, meaning the amount you borrow is the amount you have to pay back with no costs for borrowing the money.
Youíre have to give your boss a reason for wanting the money, that might be to buy a new washing machine or to pay for your wedding or to buy a car, your boss will have to agree with your reason for wanting the money as your employer is under no obligation to offer you a loan.
Generally, your be able to borrow twice your monthly salary, any more than that and your employer will be thinking that itís unlikely that your ever be able to pay the money back and talking of paying the money back the loan repayment will be deducted directly from payroll at an amount that you and your employer have decided upon.
For example, letís say you borrowed £1,000 from your boss and you both agreed to pay £100 back per month, then for ten months you would pay £100 until the loan had been repaid, the god thing about a work loan is that the repayment is taken directly out of your wages, so you donít have to find the money each month and your employer is assured of getting the payment each month.
If you hand your notice in, then the money that you owe will be deducted from any money owing to you and maybe if you would have been paid for any holiday days you wonít get paid if you haven't paid the loan off, because your in a hurry, because your leaving.
Your employer is unlikely to lend you the money if you are a new employee, if you have only been working at the company for a couple of months then you wonít be able to ask for a loan and certainly you wonít get a loan if youíre on probation or HR have any issues against you like always turning up late or HR have spoken to you about poor performance.
Of course your employer might just flat out refuse to lend you any money, itís not a legal requirement and you might be embarrassed to ask for the money or tell your employer what the money is for, your employer might even ask to see the quotations for whatever it is you want the money for, for example if you wanted to buy a wedding dress then they might want to see the quote and of course your boss is not a bank so they might tell you to Ďlive within your meansí or get a cheaper wedding dress for example.
So itís not guaranteed that your be able to get a work loan, what else can you do, well there are several other loan options available to you and these fall into secured and unsecured loans, unsecured loans have a higher rate of interest (cost you more) and are harder to get as your need to have a good credit history and secured loans are secured against your house or your car, if youíre a tenant (renting) then you wonít be able to get a loan against your home, if you have a mortgage then you could get a second mortgage, but that involves valuations and surveyors and is a costly type of loan and maybe more money than you need or you donít have a home to lend against.
Many more people will have their own car, did you realise that you can borrow against your car and get a loan for the value of your car, so if your car is worth £10,000 then your be able to get a loan for £8,000, a logbook lender will always offer you 20% less than your cars value, this is for safety reasons because if you were unable to pay the loan back and your car had to be sold to pay the loan off the chances of your car being sold quickly for 100% of its value are slim.
How does a loan work? well, whether your borrowing money against the value of your car with a logbook loan you are lent the value of your car by the lender and you make a monthly repayment, this repayment includes a payment for the capital of the loan, the actual amount that you have borrowed as well as an interest payment, itís the interest payment that is the cost of the loan, a work loan is unlikely to charge you interest whilst a logbook loan being a commercial loan, i.e. the lender is in business to make money will charge you a fee.
The fee for all loans is called APR (Average Percentage Rate), itís the interest charged on the loan, you might ask if you can get a personal loan? Well personal loans are higher risk as the money is being lent against you rather than against your car, this means that the lender (bank, building society, cash lender or payday loan lender) must trust that your pay the loan back.
The way that the lenders decide whether they can trust you (the borrower) is by looking up your creditworthiness with a credit reference company like Experian or Equinet, every time you pay a bill late or withhold payment because your arguing with a company about the poor service they have provided or if you try to take out a loan and are refused or even apply for too many unsecured loans then your credit score will be lowered because whoever you owe money too will report you to the credit reference agencies.
This means that itís very easy to get a poor credit score and therefore very hard to get a personal loan, well, you might still be offered a personal loan but at a much higher rate than someone with an excellent credit score, thatís the Ďpunishmentí for having a poor credit score, you pay more because you are a higher risk to the lender, if you didnít pay back money owed like your credit history shows you have done in the past then the lender will have lost the money you owe them and would have to pursue you through the courts to get their money back.
Is it a good idea to get a personal loan? your face higher interest rates than secured loans and if you donít have a good credit history your pay even more, with loans against your car (logbook loans) easier to access and with more money available (you can borrow the amount of money that your car costs) there are cheaper and quicker ways to borrow money.
How do you know if you qualify for a loan? with an unsecured loan thatís actually a difficult question to answer, you see unsecured loans are secured against you as an individual, itís a personal loan and so the lender must look at your personal credit history to see if you have a good credit record, even applying for several loans or being refused a loan can cause your credit score to be lowered.
So for an unsecured loan the lender canít just check your details with a credit reference agency as all these credit checks will actually lower your credit score, so the unsecured personal loan lender must find a way to offer you a quote without using a credit reference agency and that is what a soft search, soft loan or no credit footprint loan means, basically the lender does not give you a real quote but gives you an average quote, someone with an average credit rating borrowing an average amount of money (whatever that is) over an average repayment period would be charged an average rate of interest, its not a quotation you can rely on, itís just an indication, you could apply for the loan you have been soft quoted for and still be refused the loan and still have your credit sore lowered for loan refusal.
With a logbook loan itís much easier to know if you qualify for a loan, you can simply get a free quotation online by entering your cars registration number, the lender will then look up your car details online along with your details as the car owner like insurance and registered keeper, then your be given a loan quotation for the value of your car, this will be the value that the logbook lenders online systems determines is fair value for your car, remember it will be 20% below the resale value of your car.
If your happy with the loan offer you can go ahead and complete the loan application to be given the money, a logbook loan quotation will take into account your own individual circumstances whilst a generic unsecured loan soft quote will not be customised to you at all, so you can only really know the details of the loan your applying for with a logbook loan.
With a logbook loan there are no early settlement fees, just like with a work loan, your employer is not going to charge you more for paying back your work loan early, a logbook lender wonít charge you either but an unsecured loan lender surprisingly will charge you for paying the loan back early because an unsecured loan has a high rate of interest (your charged a lot of money for borrowing) and so the unsecured lender would lose this money of you pay back early, so they charge you a penalty so they donít lose the money.
With a logbook loan just like a work loan there are no overpayment fees, if you have a work loan and have agreed with your boss that he can take £100 out of your wages every month to slowly repay the loan and one month you have a bonus at work and you tell your boss to keep the bonus to pay back more of the loan, your boss wonít charge you a penalty for paying back more money sooner and neither would a logbook lender, but an unsecured lender with their high rates of interest wonít want you to save yourself money (by reducing your loan) so will charge you a penalty of you try.
One of the advantages of a logbook loan over a work loan is that you donít have to tell the logbook lender what you want the money for, itís an Ďany purpose loaní to quote the lingo, you might be embarrassed to tell your boss or even have to prove to your boss what you want the money a logbook lender wonít even ask.
Just like a work loan a logbook loan wonít charge you any upfront fees for you loan, donít use as lender that wants any service fees or arrangement fees or valuation fees when there are other lenders that wonít charge.
With a logbook loan you can borrow the money from three months to seven years, thatís probably a lot longer time to pay the loan off than your employer would give you, so if your employer wants you to pay the loan off quickly, too quickly which would leave you short of money then a loan against your car might be a better choice for you.
With a logbook loan you keep driving your car and using your car just like you did before you had the loan, you donít lose access to your car, the lender might request that you post them the V5C certificate of the registered keeper that you received from the DVLA but each lender will have their own requirements and you might not have to do this.