A motor vehicle can be a resourceful business asset. While commonly used for getting around and transporting critical supplies, automobiles may also serve as security when seeking quick funds to offset seasonal cash flow issues.
Logbook loans are famed for being remarkably accessible compared to other traditional business loans. However, the approval process may drag on much longer if you’re not armed with the prerequisites.
In this post, we unpack a step-by-step guide to procuring a logbook loan against your vehicle.
1. Familiarize Yourself With Logbook Loans
A logbook loan is a type of secured loan in which your car serves as collateral.
In this arrangement, you secure credit financing against your vehicle’s logbook but retain ownership of the car while servicing the loan. The lender would only repossess your motor vehicle in the unfortunate event of a default.
The flexibility to retain ownership of your car makes a log book loan the go-to financing option for cash-strapped businesses. You can utilize your vehicle to run business errands in the meantime, ensuring operational continuity.
2. Determine If You Require a Logbook Loan
Obtaining a logbook loan is remarkably easier than many other secured loans. However, the decision to pursue this credit financing option should be well-thought-out.
Applying for a logbook loan would be a great idea if your business is experiencing temporary cash flow issues. You could utilize the funds to offset outstanding invoices or add more inventory.
Other ways to expend logbook loans include repairing broken office appliances, acquiring new business equipment, and undertaking major office renovations.
3. Satisfy the Minimum Eligibility Criterion
To be eligible for a logbook loan, you must demonstrate legal ownership of the vehicle you intend to collateralize. That’s regardless of whether you’re the car’s primary or secondary owner.
Upon submitting your application for a logbook loan, a lender will validate that the details in the logbook or V5 document check out.
4. Meet Other Mandatory Qualifications
To use a vehicle as security for a logbook loan, it must be roadworthy. Get the car checked to ensure it’s current on MOT tests, insurance payments, and applicable taxes.
Besides, it’s difficult to borrow against a vehicle with outstanding financial obligations. If you acquired the car on an unpaid loan or have it as collateral for another logbook loan, you can’t use it to procure a second loan.
Other mandatory requirements include;
- Proof of identity (via government-issued documentation like an ID card or passport)
- Attaining the legal age of majority (18+ years)
- Proof of being a legal UK resident (via utility bills)
- Having a local bank account
5. Find a Lender
While there are dozens of logbook lenders, choosing a suitable company can be an undertaking for first-time borrowers.
Start by researching a lender’s reputation. Establish the company’s industry duration, primary target demographics, and the nature of feedback posted by its previous clients. Reputable companies that have catered to hundreds of borrowers will undoubtedly enjoy impressive reviews.
Next, ensure your preferred lender can match your loan amounts. If they can, inquire about their interest rates, repayment period, and hidden fees.
Remember, some logbook lenders may impose additional eligibility criteria besides the above-listed mandatory requirements. Check if the company insists on having proof of income or a good credit score before pre-qualifying you for the loan.
6. Get Your Car Valued
Many logbook lenders implement car valuation tools on their websites, providing instant clues into your vehicle’s worth.
But to ensure you’re getting a great deal, have the vehicle assessed by an independent valuer. That’s particularly recommended if you’re applying for higher loan amounts.
Your vehicle’s make and model will ultimately impact its worth. Besides, the valuer will consider the car’s mileage, insurance cover, and overall mechanical condition.
7. Apply for the Loan
After finding a suitable lender and getting your vehicle valued, gather the necessary documentation (based on your lender’s requirements) and formally apply for a logbook loan.
Most lenders support both online and in-branch applications. Applying online lets you bypass the often-lengthy queues at physical outlets.
Whichever option you prefer, carefully review your application for errors before submitting it. Your lender will reply with a document detailing their loan terms.
Be sure to read the fine print before appending your signature, paying keen attention to the lending amount, interest rates, and loan tenure.
8. Receive and Utilize the Cash
If you’re both on the same page, your logbook lender will advance the requested loan amount to your bank account. This typically happens within a few hours of signing the loan terms.
Once you receive the funds, ensure you use them prudently.
Remember to utilize a logbook loan only for the initially intended purpose. It’s also important to expend the money as soon as possible, albeit judiciously, so you can embark on the repayment.
Final Word
Not every vehicle should be collateralized for logbook loans.
A good practice is to stake a car that your company doesn’t use in its daily operations. Note that while you retain ownership of the vehicle, defaulting can cause you to lose a critical business asset.
That goes for personal cars as well. If you own more than a single automobile, it’s best to collateralize what you seldom use for your daily commutes.
You want to repay your logbook loan on time, alright? But in the unfortunate event of a default, your business or life doesn’t have to grind to a halt because the lender has repossessed your vehicle.
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