Can I Raise Finance On My Car And Still Drive It?
For many people their car will be the second most valuable asset after their home. As such, it affords the opportunity to raise finance against its value if extra cash is needed. Equally, if the car is already financed, it may be possible to get either a lower rate of interest charged or to raise some additional funds on the equity in the car after some of the loan has been repaid. Or you may just want to lower the monthly payment by extending the term so as to provide greater breathing space in your monthly budget.
In any event, competition amongst funders is still strong and there should be little problem in getting an indication of the terms available to you if you are looking to raise some money.
Critical to any application for finance is to ensure that your credit history is as good as it can be. Make sure that you check what your credit rating is before you embark on the process of getting quotes by looking it up at www.experian.co.uk. Whilst there may be a small charge, you will have an opportunity to see what your credit rating is and correct any mistakes or errors that may have occurred.
With your credit rating in the best possible shape you now need to look at the value of your car and whether there is any equity against which to borrow. There are a number of websites that will provide a rough quotation including www.whatcar.co.uk and www.parkers.co.uk. For a small fee, Parkers will also provide a more detailed valuation based on extras and additions.
Even if you already have a loan on the car, you may be able to save money or raise additional finance. If this is the case, contact the lender to see what new terms they might offer. As you already have a payment record with them, they may offer you competitive terms for additional borrowing without settling your existing loan. In any event, you will need to get a settlement figure from them since you will need to know how much you have to pay off if you raise a new loan with another company.
Now you have all you need to start hunting for a new loan. If the amount you wish to borrow is relatively small (say below £5,000) then this will be an unsecured loan with only the lender's interest registered against your car details in a credit file with one of the main bureaus, such as HPI. If you are looking for a larger amount to borrow, the lender may look to take ownership of the car (i.e. physically buy it from you) and allow you to remain as the registered keeper. This form of secured lending is uncommon since it is administratively expensive and time consuming. Therefore, for larger amounts, you may be asked to consider a loan secured against the value of your home rather than the car. This has a number of advantages in that it should result in a lower interest rate being charged and a longer period over which to repay. However, there can be some hefty set up and valuation fees to pay so make sure that you get several quotes and, if necessary, get some independent advice from your local Citizens Advice Bureaux (www.citizensadvice.org.uk).
Cars depreciate in value and, as road going vehicles, can be involved in accidents. Therefore, all lenders will require you to comprehensively insure the car to protect them in the event that the car is written off. You may also want to consider some form of Gap Insurance where the amount between the outstanding loan and the value of the car is insured up to £5,000 (or more in certain instances). This will ensure that you have sufficient funds to pay off the loan if the car is stolen or written off in an accident.
The actual application process is simple and straightforward. You will need to provide details of your employment with income and expenditure amounts and information on the car and any loan outstanding. The whole process can be done on many online sites or over the telephone. No matter which method, the application shouldn't take more than 10 minutes to complete and you should receive a response within 24 hours. If accepted, the paperwork can be completed by post or in person and the funds will be wire transferred into your account the same day.