Things to remember if you are considering logbook loans

If you sometimes find yourself struggling to make ends meet each month, then chances are that you will be familiar with short-term loan solutions such as payday loans. Indeed, payday loans are highly popular - not to mention highly effective - ways of 'bridging the gap' from one payday to another, on those occasions every now and then when you just don't have enough money coming in. It is, of course, important to ensure that you combine such loans as a short-term form of assistance with good financial management so as to lessen your dependence on them.

Payday loans are not, however, the only loan solution out there if you find yourself in a 'payday emergency' situation... which is just as well, given that you might not always be approved for one. That's because, whether you have been rejected on account of bad credit such as CCJs, or even simply because you are self-employed, you've also got the option of logbook loans. These are loans that use the logbook of your car as security, so just as long as you own a car that is free of other finance, you can probably obtain one.

However, there are various things to bear in mind when you are deciding whether to opt for logbook loans. For one thing, you will need to ensure that you are a UK resident of at least 18 years of age, as well as that you are the legal owner of the vehicle and can provide all of the relevant documents. Such documents that will need to present in order to obtain a loan include the logbook (V5), which you will need to ensure is actually in your name, in addition to the insurance certificate or valid cover note, a form of ID that features your photo (such as a passport or driving licence) and a recent utility bill.

One other thing that you will need to be especially aware of, if you are new to short-term loans, is the potentially confusing nature of APR when it comes to this type of loan. APR, or Annual Percentage Rate, is a measure that was created by the government as a means of comparing the cost of different loans. Factors that the APR takes into account include the interest rate that is charged, as well as the administrative expense of setting up the loan. The fact that the APR calculates the cost of borrowing over the whole year, however, makes it rather misleading as a measure of the true cost of logbook loansor other loans that are only normally taken out for a shorter time period.

Instead of the APR, when you are comparing the cost of logbook loans, you are best advised to consider the amount of interest that the lender adds each month. One example of a competitive rate in the case of logbook loans would be 20% per month, or £20 for every £100 that you borrow. Convert this to APR, however, and you would be presented with a very confusing 799.90% rate!