A V5 loan – otherwise referred to as a Logbook Loan, is a convenient way to borrow money by using your finance-free car as collateral.
You can still keep driving your car while you are paying back your loan. The minimum term is usually six months, ranging up to 36 months, though you can repay the entire amount early with no penalty.
Logbook Loans can be used to fund a number of things. Auto Advance, one of the longest established lenders, has shared how people commonly use money raised through a V5 loan. Essentially, the cash can be used on what ever you wish, from managing a short-term cash flow issue, paying unexpected or emergency bills, to investing in a business idea: the choice is yours.
- Weddings
Planning for a wedding is always a lot of fun: the cake, outfits, flowers, food … there is just so much to consider! It can be a financial strain though, with costs unexpectedly over-running even the most carefully planned budget. Perhaps you want to go on a honeymoon and feel that you cannot afford to pay for one right away? In this situation, a V5 loan will allow you to take out a loan depending on the value of your car, and you can pay it back on a payment term that suits you.
- Home repairs
Maybe your home is in need of a fix-up: the boiler breaks down, the back bedroom develops a damp patch, or your roof has fallen during bad weather. If you have a rainy day fund that you’ve saved into diligently, then that’s great! But what do you do when you haven’t been able to put pennies aside, or you’re having a bad run of unexpected expenses? This is another of the main reasons people will organise a V5 loan. They are easy to apply for and the money is put into your bank account within hours – ideal for an emergency.
- Vet bills
If your pet gets injured or is diagnosed with an illness, vet bills can be high – hundreds of pounds if your dog has a broken leg, for example – and it’s a fact that not every pet is insured. A V5 loan is suitable to pay for this kind of emergency because, as mentioned above, it can be organised swiftly and without fuss. Any vehicle is suitable as long as you own it outright – it can be a car, van or a truck, or even a motorbike.
- Business start-ups
Some people use a V5 loan to invest in or fund a winning business idea. Banks might refuse to give you a business loan, or some entrepreneurs simply want more flexibility, control and to avoid having to jump through bureaucratic hoops. As an ethical lender Auto Advance assesses that you are able to repay the loan, but it doesn’t run a credit check. For small businesses that can be started up on a relative shoestring, V5 loans are ideal. Auto Advance says its average loan size to be £920, repaid on an average of 11 months term, with many people choosing to – and being in a good financial position to – repay sooner.
- Christmas
Certain times of the year are more expensive than others, and even though we know Christmas is one of these times, we’re always unprepared! Short-term loans during this time of the year are common. Rather than turn to Paypay Loans or use credit cards, some people prefer to pay for their festivities with a Logbook Loan. In this case, they always know what the monthly payments are going to be, the interest rates are very competitive, there are no hidden charges, and they have the reassurance that the debt will be paid off within a set period of time.
So overall – a V5 loan can be used for pretty much anything you like. You should always remember that, as with any secured loan, your property is your guarantee that you will repay it: if you default on payments, your car could be sold to repay your debt and any surplus paid back to you.
Main image: Image of the Lexus GS 450h, by Lexus UK @ Flickr
