Logbook loans are a game-changer for businesses seeking financing to offset negative cash flow or fund emergency expenditures.
The biggest attraction of logbook loans is the ability to borrow money without ceding full control of your vehicle. Depending on your preferred lender, you could enjoy additional perks like swift loan processing, competitive interest rates, and a reasonable repayment period.
However, like most business loans, due process is necessary to access and secure a logbook loan. Here’s the ultimate guide to borrowing money against your vehicle.
1. Start With the Right Lender
Finding a suitable lender is the most important step when seeking to borrow a logbook loan.
Ideally, your desired loan amount will determine the perfect choice for a lender. Prioritize reputable logbooks loans London providers who can match the required sum.
The next step is to assess the lender’s interest rates and repayment period. Lower interest rates typically correspond with longer repayment periods, although this ultimately depends on individual borrowing terms.
The repayment schedule also determines the suitability of a logbook lender. While some lenders let you choose between weekly and monthly repayments, pick a schedule that aligns with your business’s cash flow patterns.
Since you likely need logbook loans to address a cash crunch in your company, it’s essential to also factor in the loan processing time. Consider lenders that can process the loan within 24 hours tops.
Don’t forget the lender’s minimum credit score requirements as well.
2. Prequalify Yourself for a Logbook Loan
Not everyone can secure a logbook loan in the UK.
To be eligible, you must be at least 18 years old and be the legal owner of the car. You can prove legal ownership by providing a valid logbook in your name.
Besides, the vehicle in question must be roadworthy and legally insured. It must also be free of outstanding financial obligations. That means you cannot obtain a logbook loan if your car is already held as collateral in a separate loan arrangement.
Other eligibility criteria include having a UK bank account and providing proof of regular income (including bank statements and invoice records).
3. Decide On the Loan Amount
The amount of money you can borrow against your vehicle’s logbook varies with each lender. However, it’s typically in the region of £500 – £50,000.
The first thing is to determine exactly how much funding your business needs.
If your identified lender can match that figure, the next step is to understand whether your vehicle’s worth can afford it.
4. Assess Your Vehicle’s Worth
Even with a roadworthy car, there’s a limit to how much you can borrow based on the vehicle’s worth. Some lenders may only guarantee half of your vehicle’s worth.
So, assessing your car’s worth can help you manage your expectations.
Key aspects to consider include the vehicle’s make, model, year, mileage, and overall condition. Extra features, such as roof racks and bed racks, may also determine your car’s actual worth.
Needless to say, undertake necessary repairs before proceeding with the loan application process.
5. Gather the Necessary Documentation
Personal identification documents are mandatory before applying for a logbook loan.
Prepare original government-issued IDs, such as your national ID, passport, and driver’s license. These are necessary to confirm your identity.
Besides, you’ll need to provide your vehicle’s original logbook, relevant insurance certificates, and proof of income.
As evidence of financial liquidity, most lenders will require recent bank statements up to six months back. Others may also require pay slips and statements of accounts receivables.
6. Make a Formal Application
The internet has tremendously eased the process of applying for logbook loans. Simply head to your identified lender’s homepage and follow the stated procedure to tender your application.
Keep in mind that some lenders may require you to download an app before accessing their loan products.
Either way, fill out the provided form and upload the required documents in the indicated format. Review your application for accuracy and upload it for review.
7. Get Approved and Sign a Bill Of Sale
If the lender approves your application, you’ll receive a notification. The next step is to sign a bill of sale.
Signing the bill of sale typically happens in the lender’s physical offices, although digital options may be available. It temporarily transfers your car’s ownership to the lender.
By lodging the bill of sale with the high court, the lender can repossess your car in case of default without seeking further court approval. You certainly don’t wish for things to get this far.
When visiting a lender’s physical address, remember to carry original copies of the digitally submitted documents for verification. You may also leverage the opportunity to reread the fine print and ensure you’re both at par on the borrowing conditions.
8. Await the Funds
After signing the bill of sale, your lender should begin processing the loan immediately.
Note that the lender may still disqualify you based on any discrediting information that surfaces in the meantime.
If everything looks good, the lender will disburse the money to your bank account, followed by a notification. Allow several hours for the funds to be reflected in your account.
9. Spend the Funds
Congratulations on successfully applying for a logbook loan.
You can now go ahead and spend the money as you wish, right? Well, wrong.
As with most business loans, logbook loans should strictly be channeled to the intended purpose.
One ingenious way to spend a logbook loan is to settle all accounts payables. You could also use the funds to settle employee wages and salaries, increase inventory, or purchase business equipment.
10. Honor the Repayment Plan
Defaulting on your logbook loan can cause you to lose your vehicle’s ownership, usually without warning. Late repayments can also hurt your credit score and make it exceedingly difficult to procure more loans in the future.
Therefore, timely repayment is paramount.
Prioritize repaying your logbook loan whenever cash flows in. You could kick-start the repayment plan by making one huge lump sum. This provides a head start if you fall behind with any scheduled payments.
Wrap Up
Logbook loans appeal to many businesses for quick access and low interest rates. Although secured against your vehicle’s logbook, it’s exciting to know that you can maintain ownership and usage of the car while servicing a logbook loan.
However, the numerous benefits of logbook loans shouldn’t discount the significance of due diligence when scouting for the right lender.
Insist on a lender that guarantees higher lending amounts, reasonable interest rates, and a flexible repayment plan. More importantly, the borrowed money should be used strictly for the intended purpose.
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