Everything you need to know about Logbook Loans
A logbook loan can be a quick way to borrow money. But are you eligible? And are there any downsides? We take a look
If you need money quickly, you might be eyeing up a logbook loan. Be warned that they can come with steep fees and high APRs.
What is a logbook loan?
Logbook loans, sometimes known as V5 loans, are secured against your car. This means the lender will temporarily own your car until the loan is paid back and can take away the vehicle and sell if you fail to make repayments.
You’ll be able to still use your car as long as you repay the loan. Logbook loans in the UK are available in England, Wales and Northern Ireland but not Scotland. It is important to remember that logbooks can be an expensive way of borrowing and are best avoided in most circumstances. Here at MoneySuperMarket, we do not offer logbook loans.
How do logbook loans work?
This is what you can expect when you take out a logbook loan:
Where to get them: You can find logbook loans online or the high street
Bill of sale: In order to get a logbook loan, you have to sign a loan agreement called a ‘bill of sale’ and this temporarily transfers ownership of the car to the lender. If the lender registers this document with the High Court, they can repossess your car without seeking court approval. If the lender hasn’t registered the bill of a sale, they can’t repossess your car unless they go to court.
Documents: You’ll normally have to give the lender your car’s logbook or vehicle registration document – this is to prove you’re the registered keeper of the car.
Receiving the funds: You should be able to get your money through transfers directly to your bank account or even in cash. Your lender should give your information which clearly explains the loan agreement including loan length and monthly repayments.
Am I eligible for a logbook loan?
Eligibility requirements for a logbook loan will vary across lenders. But this is what is generally required:
You must be over 18 years of age
You must have a UK bank account
Your car must be clear of finance (or the outstanding finance must be low)
Your car can’t have a loan secured against it
Your car must be road-legal including being taxed, insured and MOT’ed
You must provide proof of regular income to cover repayments
You must be the legal owner of the car
The V5 logbook must be in your name
How much can I borrow with a logbook loan?
How much you’ll be able to borrow with a logbook loan will vary across lenders. However, in general logbook loan providers are prepared to lend between £500 and £50,000. The amount you’ll be able to borrow will depend on how much your car is worth. Some lenders may lend you half of your car’s value.
What are the fees associated with logbook loans?
Logbook loans are more expensive than other loans because of their sky-high APRs. Logbook loans’ APR rates can be as high as 400%. To put that in perspective, most secured loans have APRs below 10% and even the most expensive secured loans generally come in up to 13% APR.
You may also incur other fees with a logbook loan if you want your money in cash instead of a bank transfer. Some lenders may charge fees of up to 4% of the loan if you choose to receive your funds in cash.
What are the pros and cons of logbook loans?
Here are the upsides and downsides with logbook loans:
Advantages:
Can pay off your loan early: For other types of loans, you’ll likely face an early repayment fee if you pay the loan off early. However with logbook loans, you will usually not have to pay a penalty for settling your loan early. (This might not always be the case, so check with your lender)
You can borrow money quickly: One of the major benefits of a logbook loan is that you can get access to the funds faster than with other types of borrowing. Depending on the lender, you could even get the funds in an hour.
You could get access to more money: The logbook loan amount will depend on your vehicle. If you have a very expensive car, you could borrow more money. A logbook loan may let you borrow more than you could with a standard loan because the lender bases the amount on your car’s value.
Weekly repayments: Most logbook loans are paid back in weekly repayments, this might suit you better than paying back your loan every month.
Disadvantages:
Expensive: APR rates on a logbook loan can be as high as 400%, making them an extremely expensive way to borrow.
You could lose your car: If you can’t keep up with payments, you face the possibility of losing your car, as your loan is secured against your vehicle.
No direct debits: Some lenders may not allow you to set up a direct debit, this puts the responsibility on you to keep up with loan repayments. This can be very inconvenient when the payments are weekly.
Less financial protection: Logbook loans have less protection for you as a borrower than other loan types.
Can I still use my vehicle while I have a logbook loan?
You’ll still be able to drive your car while paying back your logbook loan. You will only have to stop using it if you don’t keep up with the loan repayments, in which circumstances the lender will take ownership of your car.
Can I get a logbook loan with a bad credit score?
Because many logbook lenders don’t carry out credit checks, you could get a logbook loan with a bad credit score. Because the logbook loan is secured against your car, lenders know they can repossess your car if you can’t keep up with loan repayments. This could be why they’re more willing to lend to borrowers with lower credit scores who might be rejected by high street lenders.
Although it might seem like a good thing that you could get a logbook loan with bad credit, this carries a lot of risk. If you can’t keep up with payments, you risk your credit score plummeting further and losing your car.
What happens if I can’t make my repayments on a logbook loan?
If you can no longer keep up with the repayments on your logbook loan then you face the prospect of losing your car. The lender can sell your car to pay off the outstanding debt. If the value of your vehicle isn’t enough to pay off the entire loan, you may still be liable for the remaining balance.
If the lender repossess your car, they will have to send you a default notice first and you’ll have 14 days to respond.
What are the alternatives to logbook loans?
Due to how expensive and risky logbook loans can be, they are usually best avoided. Here are other options for borrowing money:
Secured loans: A secured loan lets you take out a loan against a secured asset, usually your house. With a secured loan you can borrow a large amount of money, however you run the risk of losing your home if you don’t keep up with payments.
Credit unions: Credit unions are an alternative to banks and building societies and are set up by people who have something in common-they live in the same neighbourhood, for example. A credit union might be ideal if you’re on a low income and need to borrow money for a short time.
Budgeting loan: These are loans from the government for people who have been receiving specific benefits for six months. These loans are interest free and you only pay back what you borrow.
Help from family and friends: If you are able to, you could ask your loved ones or close friends for a loan. This loan could even be interest-free, depending on the agreement you’ve made. However getting financial help from family and friends risks damaging the relationship if you’re unable to pay them back.
Other Useful guides
If you want to learn more about loans, we have a range of guides for you to read:
Unsecured Loans vs Secured Loans
Compare Secured Loans with MoneySuperMarket
Here at MoneySuperMarket, we can’t help you compare logbook loans, partly because of the high risk they carry. However, you can compare an array of secured loans with us. We work with reputable lenders and can help you find the right secured loan for you and your circumstances. Looking for the right loan doesn’t have to be a guessing game as when you compare with us, we show your chances of being accepted, so you can apply for the loan you need with confidence.
MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead, we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.