Applying for a logbook loan is very simple and straightforward for many people in the UK. Having a loan request from a conventional bank declined often makes people rush to logbook loans because they can easily offer the needed cash for an emergency, clearing bills, or other urgent needs. However, a significant number of people still get declined for their logbook loans despite having cars that can help them get credit. Here are the main reasons why a logbook loan dealer may decline your loan request.
1) Inability to proof you can repay the money within the specified timeframe
In addition to proofing the identity of the car, most lenders want to have the assurance that you can repay the credit within the agreed timeframe. This means being employed or having a business with a stable income. If you cannot proof the source of sufficient income, the request will get declined.
2) Asking for cash that is more than your cash value
In many cases, lenders are willing to give out cash up to 60% of the vehicle’s current value. If you ask for cash that is more than the current value of the car, the lender will simply decline the request. It is, therefore, important to get the correct value of a car and only borrow the cash you want as opposed to going for the optimum that a lender can give.
3) Borrowing from a dealer outside your jurisdiction
In the UK, dealers are licensed to only lend clients from specific areas. For example, if you are from London, a lender in Ireland might decline your application. It is very important that you check for lenders authorized to operate in your area of residence to raise the chances of getting approved.
4) Failing to provide enough info about your financial status
To make a decision to approve a loan, the lender must have all your personal and financial details. For example, you should attach documents such as bank statements for the last six months, confirmation of your employment, and application. You also have to agree with the lender’s terms and conditions. Before applying for a logbook loan, it is important to check all the requirements and supply the required documentation.
5) Very poor credit score and other loans on your shoulder
While logbook loans are preferred because your credit background is not considered, many lenders will carry due diligence to avoid dealing with high-risk parties. Though the borrower is never told, the lender checks those with very poor credit and declines the request. If you have a recent loan and other unsettled lines of credit, the chances of defaulting on the logbook loan are very high. Many lenders will simply decline your request.
What to do if declined for a logbook loan
If the logbook loan dealers decline your request, here is what you can do;
- Consider alternative sources of cash such as credit unions and borrowing from friends
- Check with a different lender within your jurisdiction
- Identify all the required documents and provide them when making the application
- Start working on improving your credit score to win trust from logbook lenders and other financial institutions
- Think of internal methods of raising some extra cash such as austerity measures on the personal budget.