V5 loans - what do you need to know? V5 loans, or logbook loans, as they are also called, are loans you secure with your vehicle. You just hand over the papers and get the money. Oh, and you get to keep the car, too. That sounds great, but there are also other points to consider. How can a loan like this help you? What are the risks involved? Is getting a V5 loan with bad credit possible? Let's take a look at the details and answer all of your burning questions.
How Can V5 Loans Help?
Perhaps you are not convinced that V5 loans are a viable financing solution. And why should you, if you don't know anything about V5 solutions and what they can do for you? So, in the interest of providing you with all the information you need, here are some ways in which logbook loans can help you out.
Pay off money you owe
Everyone has debt, some of us more than others. Step Change placed the average outstanding personal debt in 2017 at £14,367, which is not a small amount. Especially if you owe money to friends, or to short-term lenders, it may be worth paying off the lump sum and then just repaying the logbook loan in instalments.
Invest in your future
You may be thinking that you don't need money, but everyone does. Even if you're comfortable in your day-to-day life, there is always something more to do. A home remodel, a second degree you may want to take on, an extended holiday, a wedding...the list is endless. So, why don't you take advantage of the funds you can release from your asset and invest in your future?
Pricey emergencies happen to all of us, whether they are massive home consolidations that are needed, extensive dental work, perhaps an expensive fee you have to pay, or you're behind on tax, etc. And when you need money, but don't have the credit rating to back it up, that can become a problem. But not if you can secure your loan with an asset. So take care of your emergencies the easy way.
What Are The Issues With V5 Loans?
If you are at all familiar with logbook loans, you may know that there are also some downsides, and that some people are skeptical of the arrangement. That's because not everyone is willing to take the risk, but also because some lenders are less than reliable. What are the risks with V5 loans?
You can lose your car
Obviously, the worst thing that can happen is that you can lose your car to the lender. Miss out on enough payments, and the company is entitled to come and repossess your car. And even though you may be confident that you can stay on top of payments when you get the loan, anything can happen to change your situation. It's a risk that you must always be aware of.
Short repayment term
The other issue is that the repayment term is actually very short, considering the amounts you can borrow with a logbook loan. You only have 78 weeks to repay, but can get as much as £50,000. Add a high interest rate to that, and the result is a very large monthly repayment instalment that can be difficult to afford.
Not to be pushed aside, we also have the issue of the lenders themselves. A lot of them are scammers and they will try to extort more money out of your than they should. Here are some things you should look out for:
- Assess the value of your car at an independent party. If the lender wants to do the assessment for your car, they are trying to assess it at a lower value in order to give you less money
- Be sure to check if the bill of sale is registered with the High Court and is legally binding
- If your car is repossessed and sold, look into the sale and the price; they might try to claim the transaction did not cover the full amount and that you still owe money on the loan
Should They Be Avoided?
Taking all the issues into consideration, you may be leaning towards avoiding V5 loans altogether; after all, there are risks involved, and you don't want to be on the wrong end of that deal. Should you just skip them, or is it worth looking into them, anyway?
Look - every financing option will have drawbacks; that's a given. And if you would rather not get involved with a V5 loan, that is up to you. However, there is nothing indicating that you should avoid them. As long as you take the time to do a background check on your lender before signing a contract and make sure to repay all of your instalments on time, you should have no issues. Take advantage of the funds you can release with your car!
What Alternatives Are There?
Let's assume that you've decided you absolutely do not want a V5 loan. What else is there? Well, there are actually plenty of other options you can consider, so why not review some of them and see if they're a good fit?
- Secured loans
- Payday loans
- Holiday loans
- Peer to peer loans
All in all, logbook loans are certainly worth looking into, if you're toying with the idea of releasing some funds with the help of your vehicle. They can be a tremendous help, but they also have some issues surrounding them. Whether or not they are worth the risk is up to you to decide.