It is perhaps little known that it is possible to use your car to borrow money. Logbook loans have not been top of the list when people in the UK think about taking out a loan. Bank loans, payday loans, home loans, unsecured loans and credit cards have always been popular and often the first stop people will make when looking for money. Logbook loans however have gained in popularity as people have realised that they have an asset, in the form of a car that they can borrow money against.
So when can you actually use your car to borrow money?
The car must have no finance against it
One of the main criteria to qualify for the loan is that you need to own the car outright and have no finance against it. Obviously this makes a lot of sense, as you need to own an asset before you can use it as security for a loan.
A logbook loan means you can release money from your vehicle which is otherwise tied up. In general it is possible to borrow up to 70% of the value of your vehicle, which means that the more valuable the car, the more money you are able to borrow. This is of course dependent on proving your ability to pay the loan back.
If your vehicle is a classic car or a prestige high value vehicle it can be used to borrow money. Investors in these vehicles find that they occasionally need to free up some cash, and a loan against one or more of their vehicles is an excellent way to do it. The same is true for anyone with a high value car, they are a large outlay, and so being able to still use some of the money that is tied up the car is attractive.
Every day cars
Most logbook loans are used by people who own more standard cars and are looking to borrow money because they need finance at that particular moment. At Varooma the minimum loan amount we will lend is £500, so smaller loans like this are available.
You need to be the named owner of the car
Your name must be on the logbook or V5 document for the car. You are not able to borrow money against a car that you don’t own, even if it is owned by a member of your family. You are also not allowed to make joint applications, whoever owns the car must apply for the loan on their own and loan companies will only assess the affordability of one person for the loan.
The vehicle must have tax and MOT
The vehicle won’t be eligible to be used as security for a loan if it doesn’t have tax or an MOT. The car needs to be fully functioning and fit to be driven on the UK’s roads.
You need to be able to pay the loan back
An important part of the process of being able to borrow money using a logbook loan is that you need to make sure you can afford the monthly payments. The loan company will assess your income and outgoings and decide whether they think you can afford the loan. Loans will be paid back over a period of weeks or months, depending on which is most suitable for you.
In most cases it is a simple process to borrow money, providing the car has enough value for the loan amount you need and you are able to afford to pay the loan back.
Poor credit history can be accepted
If you are being turned down by High Street lenders and other financial providers, a logbook loan can be ideal. Logbook lenders like Varooma will have more flexible criteria and often allow people who have less than perfect credit histories to borrow money. Missed past payments and County Court Judgements can be accepted and might not simply mean that you will be rejected.