• The Financial Doctor

Utilise your vehicles at its best advantage for a loan

Vehicles are one of the most common assets owned by many Australians; it is also a very good tool to be used to access funding, very similar to accessing equity in a real estate property. In legal terms, the vehicles serve as a protection to the lender against the borrower when an overdue loan needs to be recovered.

Get a loan

Vehicles with valid registration will help the borrower to obtain a higher approval; and in some cases, it can make or break a deal. Assets are particularly helpful in business loans application when the borrower’s income and/or credit are not as favourable. Obviously the more vehicles available, the better the loan outcome will be. Unfortunately the same cannot be said for personal loans when there is strict legislation on calculating income and expenses.

For how much?

Borrowers often misunderstood that they are able to borrow up to the value of the vehicle, which is not the case. As valuable as some vehicles are, they typically depreciate over time and the lender would only lend up to a certain percentage of the base value. Base value is referring to the initial manufacturing model and does not consider any later modification done by the owner. This is because the lenders are not car enthusiasts who have specialised knowledge on the modification made. The same can be said for valuable antiques or collectible vehicles.

Furthermore, the condition of the vehicles are often not inspected which can affect the value. Some lenders may arrange an agent for inspection, but it will incur additional cost to the borrower and outcome may vary after the inspection.

Nothing to worry about

Once the vehicle is on a loan agreement, there will be a financial interest registered on record with PPSR (Personal Property Securities Register). PPSR is a government body who manages the interest on assets such as vehicle, company and any items with unique serial number. The financial interest will not affect the borrower’s everyday life except when the vehicle needs to be sold; because obviously no buyer wants to purchase a financed vehicle unless the interest is removed. The lender will always be happy to remove the financial interest as long as the debt is repaid in full either via the sale transactions or prior.

Always pay your loan

Borrowers should always keep in mind that the lender has no initial intention to repossess any asset from the borrowers due to the time and resources needed to do so. If there are any accidental arrears, borrowers should always contact the lender immediately to amend or make arrangement. If borrowers are able to manage their liabilities reasonably, vehicles will be a very helpful engine to obtain quick and easy funding.

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