When to take a loan out against your car
22.06.2022 by Jack H
In light of the ongoing cost of living crisis, energy prices going through the roof, and filling a tank of petrol costing almost as much as buying a new car, the world is a fairly financially unstable place at the moment – and that’s not even mentioning the pandemic.
As a result of this current level of economic instability, more and more people are now struggling to address their cash flow. In fact, in certain circles, two in five people are now having to choose between heating their homes and feeding their children.
This, in turn, has led more people to turn to the banks for help, needing to borrow money instead of saving it up. According to a recent article on the BBC, for example, approximately 43% of people said they would not be able to save money within the next year because of the cost of living crisis, with nearly 20% also borrowing more than they did back in 2021.
However, because many lenders are still dealing with the economic fallout of the coronavirus pandemic, taking out loans and borrowing money through some of the more traditional routes is now harder than ever before.
This, coupled with the fact that many people's credit ratings will have likely been affected by unemployment and the financial difficulties of recent times, has led many people to turn to various alternative forms of borrowing, such as the one we’ll be discussing in this article.
What is a Logbook Loan?
Taking a loan out against your car – otherwise known as a logbook loan – is a form of borrowing available for car and vehicle owners.
Put simply, applying for a logbook loan will provide you with a quick and easy method of taking money out against the value of your vehicle, as soon as you have proved ownership of it with your vehicle's logbook (V5 document), of course.
How Does a Logbook Loan Work?
Say, for example, you own a brand new Tesla Model S with a market value of approximately £75,000. By taking out a logbook loan, you will – in effect – temporarily hand over the ownership of that Tesla to a lender, who will then release up to 70% of its market value back to you in the form of a loan.
The Tesla can also still be used as normal, the only difference is that your lender will now own the vehicle. As such, should you fail to keep up with your repayments, they will have the right to sell it in order to make their money back.
However, once you have completed all the repayments required on your payment plan, you will, once again, take full ownership of your lovely Tesla and your V5 document will then be returned to you.
The What, When & Why of Logbook Loans
With so many forms of borrowing currently available, yet more and more difficult to get hold of, finding the right option for your specific financial circumstances can be a lot easier said than done.
So, if you're still not sure whether taking out a loan against your car is the best choice for you, don't worry – we've got you covered.
Listed below, we have not only highlighted some of the key reasons why many people take out a logbook loan, but we have also identified a variety of situations where borrowing in this way could be a great choice for you. Here are some scenarios where a logbook loan could help:
When You Need Instant Credit
Many of the more traditional forms of borrowing can take a lot of time and effort before you even get your hands on any kind of money.
In fact, according to statistics from YouGov, approximately 17% of British people have had an application for a financial product refused in their lifetime. Likewise, UK lenders were reported to decline up to 1.8 million consumer credit applications back in 2020, meaning a lot of effort was put in for no reward.
As such, if you need money pretty quickly – whether it be for a house repair, a spontaneous trip away, or to pay a fine – taking out a logbook loan can provide you with money a lot more quickly than other means of borrowing.
Certain lenders, including Loan On Your Car, can even provide you with cash into your bank account on the very same day as your application. Talk about quick!
When You Have Poor Credit History
Whether it be on your energy bill, mortgage, broadband, credit card, or mobile phone contract, if you have struggled in the past to keep up with repayments, this will have likely left you with a poor credit history.
As a result, you will now be seen as a relatively unattractive prospect to banks or lenders, and you will likely struggle to raise funds whenever you need them most.
This is where a logbook loan can make all the difference. The ideal choice for people with a poor credit history, taking out a loan on your car is a quick and easy means of borrowing money when you really need it.
Say, for example, that your oven breaks down and you are in desperate need of a replacement. Because of your poor credit history, a logbook loan may now be your only means of securing the money you need to either repair or replace it.
When You Want to Start a Business
While on the topic of having a poor credit history, being able to obtain a business loan in these circumstances will be nigh-on impossible. Put simply, without a good credit rating, you will be lucky to borrow hundreds, let alone thousands.
However, in light of the pandemic, the number of start-ups and new businesses currently on the market has increased at a rate more than twice the rate seen in pre-pandemic times. Therefore, if you are keen to jump on this bandwagon and set up a new business of your own, a logbook loan could be a great choice.
Since you can borrow up to 70% of your vehicle’s value, if your car is worth a fair bit of money, releasing some of its value could provide you with the funds you need to go away and set up your business.
When You Want to Make Smaller Repayments
Certain loans and other forms of borrowing offer great incentives to lure you in, such as 0% interest-free periods or pay-later plans.
However, while these may sound good as an up-front option, they can become incredibly costly over time, with lenders requesting large repayments to be made on either a one-off or short-term basis.
Logbook loans, on the other hand, put the power in your hands. Depending on how much you choose to borrow, your repayment plan can be built around your circumstances, enabling you to pay what you can afford within a timeframe of your choosing.
Plus, here at Loan on Your Car, we won’t charge you any hidden or additional fees for overpaying or wanting to settle your repayment plan early.
When You Want to Travel
If, following the pandemic, you have grown sick of staring at the same four walls in your house, taking out a logbook loan could provide you with the money you need to get away on that trip you've always been dreaming about.
Whether it be soaking up the rays in Bali, swimming with sharks in Sydney, visiting Mickey Mouse in Florida, or embracing the culture of Nepal, rather than spending months saving up – or even years, as research is now suggesting – a logbook loan can quickly turn those dreams into a reality.
Plus, depending on how long you plan on going away, you probably won't even need to use your car while you're off seeing the world. Say, for example, if you decided to go away for half a year. By taking out a loan against your car on a six-month payment plan, your car will officially belong to you again as soon as your plane lands back down on the ground.
As mentioned at the start of this article, the current cost of living crisis has really turned the screw financially for a number of people and has made borrowing a lot more difficult to do.
Because of this, taking out a loan against your car has fast become an attractive option, offering a quick and easy route to instant cash.
While we recognise it won’t be the best form of borrowing for everybody, if any of the above scenarios resonate with your current situation, taking out a logbook loan could be well worth considering.
Here at Loan On Your Car, we also have more than three decades' worth of experience to our name and pride ourselves on our reputation for delivering a high-quality and fair level of service to each of our customers.
So, to find out more information about us, logbook loans, or to get started with your application process, simply call us today on 0333 577 5000 and we'd be more than happy to help.