How NOT to get tied into high interest rates on a personal loan
Borrowing money in the form of a personal loan can leave you tied into high-interest repayments for months – even if you want to pay the money back sooner.
If you arrange short-term borrowing that is more flexible, it will give you options so you don’t get trapped into an agreement.
Standard bank loans often come with a long-term agreement. They allow you to borrow upwards of £1,000, which is usually paid back in monthly instalments between one and five years. While these loans have their benefits, sometimes a lower interest rate, for instance, the agreement ties you into a repayment plan that lasts much longer than you would like, restricting your finances for longer too.
Short-term loans, such as a Logbook Loan, allow you to borrow money and repay it back in a much shorter period. This means any agreement lasts for less time, and less time means fewer repayments.
A loan that is flexible allows you to pay back money borrowed much quicker than with a standard loan. These inflexible loans usually come with structured repayments over a fixed period of time. This means you can’t pay them back earlier than the agreed date – even if you have the cash to do so. If you do you will be charged a penalty, which can be your agreed interest of up to two months.
With a flexible loan, however, you can pay back money borrowed whenever you prefer – without being charged. Logbook Loans are one example of a flexible loan, allowing you to borrow money using your car as security. Repayments are worked out on a scale linked to the amount taken and the value of your vehicle. But if you choose to you can pay back your loan much sooner, without any additional fees.
A secured loan is one that allows you to borrow money in a credit agreement using equity against an asset – your car or home, for instance. A Logbook Loan allows you to borrow money using your car as an asset.
With a secure loan, repayments can be linked to the amount taken and the value of that asset. This means the less the total value of the asset, the lower your repayment rate. This, in turn, can help with your repayment plan – paying back what is manageable for you over a manageable period of time.
Avoid getting tied in
When borrowing money, don’t get tied in. Think about choosing a secure, short-term, flexible loan with low rates, over one that is unsecure, inflexible and long-term. This will help you avoid the pitfalls of fixed continuous repayments with high-interest rates, freeing you up to save or spend your money however you prefer.
If you own a car and need a short-term loan to help with some quick fix money woes, or just to tidy you and your family over for a bit, a Logbook Loan, which is flexible and secure – and you won’t be tied into for years – could help. If you’re interested in learning more about our low rates on Logbook Loans, read our page how the logbook loan works.