As well as being the most expensive purchase after a home, a car is also the most commonly owned luxury consumer product in the UK. Therefore, it makes perfect sense that, in times of financial need, an individual should be able to release some of their car’s value in order to obtain a loan (in much the same way as someone can remortgage their home to release some of the equity in their property).
Happily, there are a now a range of lenders that are willing and able to provide individuals with what have come to be known as ‘logbook loans’ (after a vehicle’s V5 log book). Borrowing money against the value of a vehicle is a very straightforward process. Indeed, most lenders use very simple but stringent criteria to ascertain whether or not a person’s vehicle will qualify them for a loan of this kind.
Whilst these standards and rules may vary a little from lender to lender, the following pre-conditions are the most common ‘minimum vehicle requirements’:
• Vehicle must be clear (or nearly clear) of finance
• Vehicle must have a reasonable market value
• Vehicle must be no more than 10 years-old (except for classic cars).
If an individual is able to prove that they own an eligible vehicle then lenders will next assess whether or not they are the type of person that they’re willing to consider for a loan. In general, logbook loan lenders are quite relaxed about the type of people that they will lend money to and are typically more concerned about the state of an applicant’s vehicle. However, there are certain pre-requisites that a potential borrower will be expected to meet before being accepted.
In most cases, an applicant will need to be:
• A full UK citizen or a permanent UK resident
• Over 18 years old
• The legal owner of the vehicle
• Either in full time work or self-employed
• In possession of the vehicle’s V5 registration document
Although different lenders will have their own rules and conditions about repayments, they all have a responsibility to explain these in full to individuals who choose to take advantage of their services. Needless to say, it is vitally important that potential borrowers fully understand the terms of repayment when borrowing a loan amount that is secured against their car.
How Much Can Be Borrowed?
In general, lenders will typically base the amount they will lend on the value of a potential borrower’s car. For instance, if an applicant’s vehicle has a market value of £10,000 then they would more than likely be offered a loan somewhere in the region of £5,000 – £7,000.
As mentioned before, borrowing money, especially when it’s against the value of something as important and necessary as a car, is not something to be taken lightly, so applicants should only do so if they are 100% sure they will be able to find a loan with affordable repayments.