Can You Take a Logbook Loan Out On Benefits?
22.06.2022 by Jack H
Following the recent news that petrol prices have made their biggest daily jump in almost 20 years, you will probably now find yourself trying to avoid using your car as much as possible to reduce costs.
After all, it isn’t just fuel that has gone up in price.
In light of the ongoing energy increases and levels of mass unemployment following the coronavirus pandemic, more and more people are struggling to keep on top of their finances, with many now implementing methods to pinch the pennies as much as possible.
Avoiding filling up at the garage is one such method, but, with the cost of living crisis showing no signs of slowing down anytime soon, this likely won’t be enough in isolation.
As a result, many people are now looking for other ways of staying afloat – from finding a new job to asking banks for help.
However, borrowing money through traditional means is not as easy as it was before the pandemic. Not only are banks increasing their interest rates to record highs but they are also turning down more loan and credit card applications than ever before.
In other words, if you are currently unemployed or have a poor credit history, you will have likely encountered great difficulty trying to borrow money. As a result, you may now think that the only form of income you’ll have to get through these trying times will be whatever you currently earn through benefits or universal credit.
Well, that may not be strictly true.
What is a Logbook Loan?
If you own a vehicle, taking out a logbook loan could provide you with a quick and easy form of borrowing – regardless of whether you are on benefits or not.
This type of loan will effectively allow you to borrow money against the value of your vehicle.
Say, for example, that you own a car with a market value of approximately £15,000. A logbook loan will allow you to release up to 70% of this market value back to you (between £500 and £10,500 for this example) in the form of a loan, which you will then pay back on a repayment plan of your choosing.
Whether it be for an upcoming post-pandemic holiday, wedding ceremony, or unexpected boiler emergency, this money can then be used however you need it to. And, better yet, you will also still be able to use your car in the same way you did before.
What’s The Catch?
By agreeing to a logbook loan, you will need to temporarily hand over the ownership of your vehicle through its V5 document. This will then act as a form of insurance for the lender, while also providing proof that you actually own the vehicle in question.
Depending on how much money you wish to take out against the value of your vehicle, you will then need to set up and agree to a repayment plan that is both realistic and affordable in line with your benefits-based income.
Going back to our previous example, if you decided to borrow the full £10,500 against your car, you would then need to go away and calculate what you can realistically afford to pay back each month. This would then allow you to work out the appropriate timeframe of your repayment plan, which can be anywhere between 12 and 60 months.
In simple terms, the longer the length of time you choose to repay over, the lower it will cost each month, but the longer it will also take to regain ownership of your vehicle. So, the terms of your contract will really vary depending on your specific circumstances.
Will I Definitely Be Approved?
As with any form of borrowing, you will need to prove to the lender that you are a good bet, capable of actually paying back what you owe on a regular basis.
As such, when you apply for a logbook loan, a soft credit check will typically be conducted against you. This will return a credit score – a point-based system made up of your previous financial history – which will then inform the lender of whether you are eligible for the loan or not.
During cases of unemployment, or incomes based on benefits, this soft credit check will traditionally provide a fairly low credit score that may rule you out of other traditional forms of lending.
However, here at Loan On Your Car, we take great pride in looking beyond this score when reviewing each loan application, using a wide range of criteria to build your financial profile and assess your ability to repay the loan.
We deal with each application on a case-by-case basis. As such, your likelihood of getting approved will really depend on two key things: firstly, your current circumstances. And, secondly, your previous financial history.
Generally speaking, the only instances where we won't be able to provide any kind of credit is in cases where an Individual Voluntary Arrangement (IVA) has been set up to overcome any previous bankruptcy issues you might have had.
What Perks Do Logbook Loans Offer People on Benefits?
If you are on benefits or a universal credit income, this will typically rule you out of a wide range of borrowing options, such as credit cards or loans.
However, this might not necessarily be a bad thing. After all, many forms of borrowing traditionally come with an array of hidden fees and complicated terms that could lead you to pay back more than you thought you were initially agreeing to.
On the other hand, taking out a logbook loan can offer a number of perks that other types of borrowing won’t be able to offer when on a benefits-based income. These include:
No hidden fees
Logbook loans are an easy-to-understand form of borrowing that won't incur any additional costs. Plus, by borrowing from Loan On Your Car, we take great pride in ensuring you understand everything you are signing up for beforehand, helping keep you in the know on any possible charges you could encounter by failing to pay on time.
Many forms of borrowing often involve a lengthy application process that doesn’t guarantee any kind of success by the end of it. However, with a logbook loan, once you are approved and verified as the vehicle's owner, the money you requested could be paid into your account that very same day, allowing you to use it as quickly as you need to.
Retain vehicle access
While some people on benefits may think they have no choice other than to sell their vehicle, a logbook loan offers a flexible solution that will allow you to borrow money at the same time as retaining vehicle access. This means that, while the lender will technically now own the vehicle, you will still be able to use it however you wish.
Free to settle early
Financial situations can fluctuate from time to time. One minute, you can be doing OK financially, then, a few weeks later, you find yourself struggling. As such, while you may need some extra help right now, if you come into some money over the next few months, logbook loans can be paid off early with no additional penalties or costs.
Repayments built around you.
As we've already mentioned, a logbook loan repayment plan can be built around your specific circumstances. From deciding how much to borrow in the first place to how long a term you want to pay it back for, a logbook loan is a flexible financial solution that puts you in the driver's seat (pun intended).
Help build credit
Having a poor credit history can make you look unattractive to other lenders. Therefore, by taking out a logbook loan and proving you can pay back what you owe on a regular basis, you will help increase your credit score and be a more appealing candidate when applying for other forms of borrowing in the future.
The current economic uncertainty is shining a spotlight on personal finances like never before, leaving many people searching for ways to make ends meet and keep on top of their outgoings.
However, just because you find yourself on a benefits-based income, this doesn’t necessarily mean that there is no financial assistance available to you.
While the more traditional forms of borrowing may be unavailable due to your current circumstances, here at Loan On Your Car, we take great pride in treating everyone fairly – regardless of their previous financial background.
So, if you are keen to find out more about logbook loans, or want to get started with the application process, our friendly team would be more than happy to help.
With more than thirty years’ worth of experience to our name, we have helped a huge number of customers cope with their financial difficulties. So, why not see what we could do for you? Give us a call today on 0333 577 5000 or click here to find out more about the process of applying for a logbook loan.