It is not well known in the United Kingdom that it is very much possible to use your vehicle as security for a loan. Logbook loans are not at the top of the lists when people consider taking out loans in the United Kingdom. Payday loans, bank loans, unsecured loans and home loans have always remained on the front along with the use of credit cards when people fall short of money to take care of their emergency expenses. Logbook loans are slowly gaining in popularity as people have started to realise that they have an asset at home in the form of their car that they can safely borrow money against.
When can your vehicle be used as a security to borrow cash?
- Your car should not have any finance against it – One of the most important criteria for the logbook loan is that you have to be the owner of the car on an outright basis and that your vehicle should not have any finance against it. One of the functions of a logbook loan is that you can have money against the pledge of your vehicle that is otherwise attached elsewhere. It is possible that you can borrow up to seventy per cent of the market value of your vehicle. The more market value you will get for your car should you sell it, the more money you will be able to borrow against it.
- Mostly, logbook loans are taken out by people who are owners of standard cars and who are seeking to borrow cash as they need urgent finance to meet emergencies. The minimum amount of the loan offered by logbook loan dealers is £500.
- If you own a high value prestige car or a classic or vintage vehicle, you can very well use it to borrow money. Investors in these kinds of cars occasionally find that they need to free up a little money and a loan against these cars is a smart way to go about it. These kinds of cars can be used as a large outlay.
- You have to be the owner of the vehicle as per the V5 document – Your name has to be on the V5 document or the log book of your car. You will not be able to borrow money against a vehicle that you do not own. You will also not be allowed to make applications on a joint basis. You can apply only as an owner of the vehicle for the logbook loan.
- The car will not be eligible for a logbook loan as a security if its taxes are not paid up in full or if it does not have a MOT (Ministry of Transport Test) carried out.
- The car has to be roadworthy and should be in proper functioning order so that it is fit to be driven on the roads in the United Kingdom.
What happens if you are not in a position to repay the logbook loan amount in time?
It is best for the borrowers to discuss the problem with their lenders when they find out that they are not in a position to repay the loan amount within the contracted loan period. Many times, the borrowers feel that the primary directive of logbook lenders is to recover their cars after defaulting. This is not always the case. Borrowers do not realise that the entire process of recovering their car is a costly and a complex affair for the lenders. The lender needs to engage recovery companies of a third party nature and auctioneers to sell your car. Even when the car is sold, it is not guaranteed for them that the sale will raise the balance amount that has not been repaid by you. This could lead to lawsuits in trying to follow you for the balance loan amount. As a result of this, many lenders are more than willing to negotiate when borrowers have non-payment issues. It is better to talk to the lenders and review your financial situation as many of them will allow you reprieve for some months to recover the balance loan amount with a little penalty attached to such adjustments.