How do they work?
Logbook loans let you borrow money against the value of your vehicle, and use it as a deposit in case you cannot keep up with your payments.
When you take out a logbook loan you hand over your registration documents or vehicle logbook to the lender until your loan is repaid.
Using a logbook loan you:
Can choose to borrow between 6 months and 5 years
Have to pay interest
Can spend the money on anything you like (not just a buying a vehicle)
How much could you borrow?
Between £500 and £150,000 depending on your circumstances and your vehicle's value.
You can normally borrow up to 50% of the value of your vehicle, but some lenders may go above this.
Your income, credit history and existing borrowing may also all affect how much you can borrow.
Do they take your vehicle away?
No, you can continue to use your vehicle but you will not technically own it.
However, if you default on your loan the lender can take your vehicle away and sell it to get their money back.
Who can get a logbook loan?
To get a logbook loan you must be over 18, the legal owner of your vehicle and be named on the vehicle's V5C registration document.
Anyone who fits that criteria can apply for a logbook loan, but they are often aimed at borrowers with poor credit who may struggle to borrow using a normal loan.
What vehicles are accepted?
You can apply for a logbook loan against almost any type of vehicle, including:
If your vehicle has any finance outstanding on it when you apply it is unlikely your application will be accepted, unless it has nearly finished. Your vehicle will also need a valid MOT.
How much do they cost?
There is no cap on how much lenders can charge you for a logbook loan. Most offer rates around 100% to 200% APR (annual percentage rate), but some charge over 400%.
While all logbook loans are expensive shopping around could save you hundreds of pounds. Here is how the APR can affect how much you pay on a logbook loan of £1,000 over 12 months:
|APR||Weekly payments||Interest cost||Total to pay back|
What affects the cost?
When you apply for a logbook loan you get a personalised quote based on;
How much you want to borrow
The value of your vehicle
How much your vehicle's value deteriorates over time
Your credit record
What are the risks?
Losing your car
If a logbook lender takes your vehicle away to sell it, your loan is not automatically paid off.
What happens depends on how much you owe and the money they get when they sell your vehicle:
If your vehicle sells for less than you owe: You still have to pay back the rest of the loan, and if you are unable to pay, the lender may take you to court.
If your vehicle sells for more than you owe: You get the rest of the money back, but the lender may not get a good price as they sell at auctions to get a quick sale.
Damage to your credit record
While logbook loans are one of the few loans that do not appear on your credit record they could still damage it if you are unable to pay back what you owe.
If you still owe the lender money after your vehicle has been sold they can take legal action to reclaim the money. This may include applying for CCJs which have a negative impact on your credit record.
What happens when you apply?
If you have decided to apply for a logbook loan you should:
Check the value of your vehicle
Work out how much you need to borrow
Look for a lender offering the lowest APR possible
Once you have chosen a lender, apply online to get a personalised quote based on your circumstances and your vehicle.
Your location matters
How your loan will work depends on where you live:
If you live in England, Wales or Northern Ireland the lender will normally ask you sign a Bill of Sale, this gives them the authority to sell your vehicle if they need to.
If you live in Scotland the lender cannot ask you to sign a bill of sale, so they will usually get you to complete a hire purchase agreement instead.
It is a legal document that transfers ownership of an asset, like your vehicle, from one person to another.
When you complete a Bill of Sale to get a logbook loan the lender becomes the legal owner of your vehicle. This means they do not need a court order to take it away if you default.
Find out more on the National Debtline website.
Hire purchase is a type of vehicle finance that helps you buy you buy a vehicle over time by making regular payments. Once all the payments have been made you own the vehicle.
With a logbook loan the lender will get you to sign a hire purchase agreement, so once they give you the funds you have agreed to buy the vehicle back over time.
A hire purchase agreement has less legal authority than a Bill of Sale, but you could still lose your vehicle if you do not pay the loan back.
Most lenders arrange to inspect your vehicle before releasing the money you want to borrow - this can sometimes be done the same day you apply.
During this inspection you will need to have your vehicle with you, your V5C registration document and proof of insurance and tax.
If the lender thinks your vehicle is worth less than you told them they may change the terms of your loan or refuse to offer you a loan altogether.
Transferring your loan
Most logbook lenders issue a cheque once your loan application has been approved.
However, some may offer to transfer the money directly into your bank account but you may have to pay a charge of around 4% if you choose this option.
Paying your loan back
When you apply you agree with the lender to make either weekly or monthly payments for the duration of your loan.
Others let you pay the interest for the duration of the loan and then repay the original loan amount at the end of your term.
How are payments taken?
This depends on the lender you choose, but payments could be taken using:
Continuous payment authority
It is a way to collect regular payments using your debit or credit card.
When you grant a company a CPA they have the right to charge your bank card on a regular basis.
They use the long number on the front of your bank card, which means if your card is cancelled or expires, you will need to renew the CPA or your risk defaulting on your loan.
Can you repay early?
Yes but there may be an extra charge if you do so check with your lender.
If you want the option to pay your loan back early look for a lender that does not charge for this.
What are the alternatives?
Some other options you could consider include:
Logbook loan FAQs
Can I get a joint logbook loan?
No, only the registered keeper of the vehicle can apply for a logbook loan.
What if I crash my car or it is stolen?
Do I have to pass a credit check to get a logbook loan?
Not always, but you still need to prove you can afford the loan repayments and that you own your vehicle.
How can I tax my car without the logbook?
You can use the DVLA reminder notice to tax your vehicle, or use the reference number to tax it online on the DVLA website.
Can I get a logbook loan if my vehicle was purchased with a finance agreement?
No, it is unlikely you will be able to apply for a logbook loan if your finance agreement is still active.