Logbook Loans

What is a logbook loan?
A logbook loan is a secured loan. The collateral used in most cases is your car (or van). Because the loan is secured against your vehicle, no credit checks are performed. That means if you apply for a logbook loan because you have a poor credit rating, you must be absolutely certain to be able to make the payments on time otherwise the logbook lenders will be able to confiscate your vehicle (and sell it).

The reason those loans are called logbook loans is simple. To be eligible, you must be able to prove that you are the owner of the car and to do so, you will have to place the V5 registration document, your logbook, with the logbook lender. When the loan is repaid, they will return it.

NB: to apply for a logbook loan, you MUST be the owner of a vehicle!

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Warning: late repayment can cause you serious financial issues. Get help on moneyadviceservice.org.uk

Must know about logbook loans

Here are a few common questions about logbook loans:

- If I take out a loan from a logbook lender, who actually owns the car?
Since logbook loans are loans that are secured against your vehicle, that means it is the lender that owns your car until you pay back the loan. You will actually have to hand over the vehicle registration documents to the lender - your vehicle logbook, hence the name of those loans.

- Can I still use my vehicle when I take out such loans?
Yes, you will still be able to your vehicle as soon as you keep repaying your loan.

- How much can I borrow?
The amount you can borrow can vary from £500 to £25,000 (or more) and will depend on the value of your car, van, motorcycle - actually on half (more or less) of its value.

- What is the usual loan term?
It ranges from 1 to a few years.

- How much should my car be worth?
Besides being the legal owner and have no current finance on it, the value of your car must be at least £500 in most cases.

What are the risks with logbook loans?

The main risk is simply to lose your car for good. If you do not repay the logbook lender, as explained above, they are now the owner of your vehicle and could sell it to write off your debt. They will first seize it and eventually sell it if you fall behind with several payments. This is also why they will only lend you about half the value of your vehicle, so they can easily cover any outstanding debt. However if the amount they sell the car for is not enough to cover the amount due, you will still have to pay the outstanding debt.

Since the loan is covered by your vehicle and lenders are not conducting affordability checks, risks are potentially higher for them. Consequently that means the cost of borrowing is very high.

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