There are lots of reasons why you might be thinking about taking out a loan - from home improvements to holidays - sometimes extra funds can help achieve this sooner than you thought.
But if you’re concerned about being approved for a loan from the high street banks or mainstream lenders, and you’re not sure about applying for a ‘payday loan’, you may want to consider taking out a logbook loan.
Am I eligible for a logbook loan?
Before you consider taking out a logbook loan, it’s a good idea to check whether you might be eligible to apply. There are a number of eligibility factors when it comes to applying for for a logbook loan:
- You own a car or vehicle that no longer holds finance (or is almost clear of finance)
If you own your vehicle outright, you’re much more likely to be eligible for a logbook loan. Similarly, if your car is less than 10 years old, you’re also more likely to be approved. However, if you’re coming to the end of your finance agreement, or your vehicle is over 10 years old, then certain providers may be willing to discuss your specific circumstances and how they can help.
- You’re the named owner on the V5 registration document (also known as the vehicle’s logbook)
If you’re applying for the logbook loan, your name will need to be on your V5 registration document or the logbook. This is essential for your application. If you’ve lost or misplaced your V5 document, you can replace it via the DVLA for a cost of £25. It may take a few weeks to arrive.
- You have a UK bank account and proof of address
When you apply for a logbook loan, the funds will need to be paid into your bank account. You’ll also need to have proof of your address, which should be in the format of a recent utility bill.
- You have a valid driving licence or passport
Photographic ID allows logbook loan providers to ensure you’re actually who you say you are when applying for credit. This also helps prevent anyone else from taking a logbook loan out in your name and committing fraud.
- Your vehicle is insured
You usually need an insurance certificate when applying for a logbook loan.
- You have regular income
As with most lenders, you’ll need to prove you have a regular income in order to make the repayments for your logbook loan. Unfortunately, most lenders will not accept benefits as a source of income.
What is a logbook loan?
A logbook loan allows you to take out a loan against your V5 certificate, the document which states that you own the car or van. A predetermined amount of money will be agreed, which you will then have to pay back over a certain amount of time. When you’ve completed the payments on your loan, your logbook or V5 registration will be returned to you. Although it is the logbook that is handed over, the loan is actually secured against your vehicle until the loan is fully paid off. As with most loans, the lender will charge APR.
Why should I take a logbook loan out?
If you’ve had problems being approved for credit before and you have a vehicle that you own outright, you may want to consider taking out a logbook loan. This will allow you to build your credit score back up, if you make the repayments on time and in full.
Bad credit may be caused by a number of factors, such as:
- Being declared bankrupt
- Making late payments on bills or other loans
- You’ve encountered a Debt Relief Order or Individual Voluntary Arrangement
- You’ve received a County Court Judgement (CCJ)
- You haven’t yet had the chance to build up a credit rating
Many logbook loan lenders can provide online quotes and even pay the funds into your bank account the same day of your application (if approved). Remember to check that the provider you’re applying to is a member of the Consumer Credit Trade Association (CCTA) and that you can afford to make your repayments.
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© Al Davies 2021