V5 loans are a great way to take out a loan if you don’t have a great credit record or when you find yourself in financial difficulties and need cash fast. Loans are typically cheaper and easier to obtain if you have some kind of security that the lender can use. Commonly, property is used as the security for a loan, but with a log book loan it is your vehicle that is used as the security.
Most people have a car, and providing it meets certain criteria such as being less than 10 years old or under a specific mileage and you have the logbook then it can be used as security for a loan.
The Benefits of this type of short term finance
If you suddenly have financial problems such as needing to pay a bill fast or you have to make an unexpected payment, it is often very good to know that you can make an application for a loan and receive the money into your account within hours. Even if you have bad credit you don’t need to worry because the application is not based on your credit rating.
There are also downsides of loans against cars and this type of finance is not right for everyone. As with any type of secured loan, whatever you use for security will be at risk if you don’t keep up the loan repayments. In the case of borrowing against a car, your car is at risk of being repossessed if you don’t keep up the repayments. You will also need to hand over your V5 document to the loans company until the loan is settled so have that to hand when you apply.
Interest rates are generally higher on loans against cars than they are on other types of loans. If you look around for the best provider however some are far more competitive in their rates than others, so do your research before taking out a loan.
What are the requirements for loans against your car?
It is easy to take out a loan against your car if you qualify when you go through the application. You will need to show proof that you have a regular income either through a job or on a self-employed basis. The vehicle needs to be fully insured and have valid tax and MOT certificates. There should not be any outstanding finance on the car either, or very little. Borrowers also need to be over eighteen years of age in order to be able to take out a loan.
How to apply
Each lender is different but most have websites that you can apply though, or you can just give them a call. If you apply online a loan agent will generally call you back to go through the application with you. They will need to ask for some details about your car and the amount that you would like to borrow. This information forms the basis for the amount that the company can lend to you.
If you are happy with the amount you can borrow and the interest rate offered, an appointment will then be set up for an agent to check your car and documents to finalise everything. Following that, the money will be transferred directly into your bank account.
In many instances this process can take place all within the space of a couple of hours, depending on your availability and the availability of agents in your area.
Settling the loan
This depends on the company you use, some companies allow you to settle the loan when you want and won’t charge you any fees for this. When you apply for your loan you agree on a repayment amount and when that amount should be paid. Your loan might run for 24 months or as little as 3 months, depending upon what you require and the terms of the lender. In most cases you will be required to make a monthly payment which repays the loan with the interest rate added onto it.
If your circumstances change and you find that you can’t pay the regular payment amount you should contact the lending company directly and tell them about your situation.
There are plenty of services to help you if you get into debt but be careful before you do take out finance, especially if you are taking out a loan to pay off another one.
A good loan company will be easy to talk to and if you are having problems making payments, speak to them and try to work out a payment plan that works for both you and them.
How to know which lender to choose?
As you can see on this site and by doing a Google search there are a lot of different lenders. So how do you go about choosing the best ones?
The first step is to look at the cost of taking out a loan, and determining which companies are the cheapest. if there is one that is significantly lower than others then obviously that is going to be attractive. Look for the representative APR of the loans to get a figure for how much you are going to pay back over the course of the loan.
Before you go ahead with a loan from the cheapest provider make sure that there are no hidden charges such as expensive fees for processing documents.
All the lenders that you consider should be a member of and regulated by the Consumer Credit Trade Association (CCTA). This means that the company that is a member has to follow the association’s guidelines which sets industry standards.
A company that offers financial products must legally have a Consumer Credit License, if they don’t they are not trading legally. In April 2014 the Financial Conduct Authority will be taking over the regulation of the industry from the Financial Services Authority (FSA) and the Office of Fair Trading (OFT).
It is important that you conduct these checks before taking out a loan so that you know that the company you are working with has standards that it works to.
Most companies will display industry body logos and company registration numbers on their website.
Think carefully before committing to a loan
Taking out a loan is something that should be thought about carefully as it is easy to get into a large amount of debt. When you are using your car as security it is vital that you know that you will be able to pay the loan back, or your car will be repossessed.
Defaulting on traditional unsecured loans or credit cards devalues your credit rating and you can often work out payment plans to pay the money back. With a V5 loan you are putting up as security something that is possibly extremely essential to your every day life, your car.
Most lenders do checks to make sure that you can afford the loan, however sometimes it is important that you know you can afford it and don’t stretch yourself too far.
If you have any other questions you think haven’t been answered here then read our frequently asked questions section which has a list of the questions people often ask.