Logbook loans are widely available and offer flexible amounts to borrow for a wide range of purposes. And, let’s face it, your car is an asset! Why Not free up some money?
However, only those who live in England and Wales as well as Northern Ireland can take out a logbook loan and for those potential borrowers in Scotland who are offered a V5 loan then they need to take a closer look at how that loan works.
However, you need to understand the pro’s and con’s on V5 loans before accessing one.
The con’s of V5 loans
It's probably best to look at the con’s of V5 loans first since there are risks that come with those wanting cash using their car as their personal loan security.
· V5 loans can be expensive
Potential borrowers need to appreciate that because there is no credit check, the lender will be charging slightly more to help cover them for the potential risk involved.
So while the interest rate is slightly higher, the loan application process is quick and approval is also carried out quickly as well. For those with a poor credit history, a logbook loan may be the answer to their financial needs.
· The obvious downside to a V5 loan
There is an obvious downside to an applicant of a V5 loan and that is the risk they run of their vehicle being repossessed. That's because the vehicle is being used by them as security for a personal loan.
Failure to keep up with monthly repayments could see the car being repossessed by the lender; they will then sell it to help them cover the loan’s outstanding balance. However, many logbook loan lenders will only repossess as a last resort should you miss repayments for several consecutive months. They may also make alternative arrangements to ensure the loan is repaid.
The pro’s of V5 loans
Having examined the downside for using a V5 or logbook loan,let's look at the pro’s of V5 Loans and why logbook loans are growing in popularity and they include:
· Easy and quick to access
For those getting a V5 Loan with bad credit history, then log book loans offer a quick and easy access to cash. For many applicants, a logbook loan is probably the easiest way to get approved for any type of personal loan.
However, you'll still need to meet the lender's criteria and own the vehicle with lenders offering a loan approval within just a few hours. The money will then be placed into your account within minutes via bank transfer.
· There is no credit check
Regardless of your credit history, for those who have a poor credit rating then this is not an issue since many logbook loan lenders do not run a credit check on an applicant. As mentioned previously, if you are the vehicle's owner then you can apply for a V5 finance even if you have a history of defaulting on loans, bad debt, bankruptcy or even have CCJs.
· Logbook loans offer flexible terms and amounts
It needs to be appreciated that V5 finance is a secured loan so the terms and amounts available will vary. Essentially, the value of the vehicle will dictate how much you can borrow with lenders offering between several hundred pounds to tens of thousands of pounds. It needs to be appreciated that some lenders will only lend up to half of the vehicle's value.
Get a V5 loan from a lender
Should your vehicle already have existing finance held against it, it might still impossible to get a V5 loan from a lender.Generally, this tends to be available to those who have a loan agreement coming to an end with a low outstanding amount plus you'll need permission from the current lender before applying for a logbook loan.
Also, when taking out a V5 loan, you will need to hand over the vehicle's logbook or the vehicle registration document, also known as theV5. This document proves that you are the vehicle’s registered keeper.
For many potential borrowers, this is an easy way to deal with an emergency financial need and repayment can take up to three years. Some lenders may ask that you pay weekly but under current law you can repay a loan early and with the higher rate of interest being charged for this type of loan,this is probably a good choice.
Alternatives to V5 loans
There are alternatives to V5 loans include applying for a loan with a credit union, accessing the benefits you are entitled and contacting a charity that helps deal with debt,says the Money Advice Service - which is run by the government.
Logbook loans have taken off in popularity in recent years as growing numbers of borrowers are using the secured loan as a way to access cash quickly to fix a short-term need.
They can also use the money for any purpose whether it's for a holiday, paying the rent or mortgage or even paying the gas bill. For many potential borrowers, a V5 loan is an ideal financial solution.
However, logbook loans have attracted criticism from financial experts who point to the higher rate of interest and the risk of losing your vehicle as reasons to think twice about them.
Choosing a V5 lender who has a sound track record
Since V5 loans are growing in popularity, there are now more lenders entering the market so accessing this type of finance is easier than it's ever been before but it's always worthwhile choosing a V5 lender who has a sound track record and is well-established.
Don't forget too, that you'll need the relevant vehicle ownership documents to hand so your loan can be approved quickly and many lenders promise to deliver the money on a same-day approval basis.
As with any loan, it's important that borrowers understand the pro’s and con’s of logbook loans before they apply.