Logbook loans are loans secured against your vehicle
The logbook loan lender is given ownership of your car until you fully pay back the loan, although the lender owns the vehicle, you can continue driving it as normal.
Read this guide to learn more about how logbook loans work, how much they cost, what the risks and benefits are, as well as the best alternative loans available if you have bad credit or are looking for short term financing.
Logbook loans can be more risky than other more mainstream types of secured lending. Should you fail to pay back the loan, the logbook loan lender will take away your vehicle.
On top of this, after repossessing your vehicle, if the logbook loan lender does not get the full amount of the loan back from selling your car then you are still required to pay back the shortfall.
So for example, if you failed to pay back a remaining £1,000 of your loan and the logbook loan lender seized your vehicle and sold it for £800, you would still owe the remaining £200.
Logbook loan lenders can also take you to court to enforce this rule if you fail to comply immediately.
Considering the cost, why do people even take out logbook loans? Many logbook loan lenders would argue that the mainstream lending industry does not cater enough to people who have bad credit and those who need to get hold of some money quickly.
Similarly, payday loans, despite huge interest rates and risky penalty deadlines, have found a gap in the market, which many mainstream lenders have struggled to fill.
How do logbook loans work?
Depending on how much your car is worth, you should be able to borrow from around £500 up to around £50,000 from a logbook loan lender.
Many logbook loan lenders are not as likely to lend you the full amount your car is valued at. Therefore, you’re more likely to receive less than what your car is valued at, so if you are looking for more than that, then a logbook loan might not be right for you.
In order to take out a logbook loan you need to be the owner of a vehicle valued at over £500 with no finance outstanding on it, although in some cases if there is finance outstanding you can get permission from your existing lender to take out a logbook loan.
When you take out a logbook loan, the lender will ask you for your vehicle registration documents and your vehicle’s logbook. These documents prove you are the owner of the car and so this gives the logbook loan lender the right to ownership of your vehicle.
If you do decide to take out a logbook loan be sure to read through the credit agreement carefully so you understand what the payment deadlines are and what the penalties are if you miss a payment.
Ask yourself if you will be able to keep up with the repayments every step of the way, and if there’s any chance you might miss one, think about if it’s worth the risk of losing your car, and possibly worse.
So long as you meet all of your logbook loan repayments you will still be able to drive your car, but the logbook loan lender will have temporary ownership of the car, until the debt is fully repaid.
Once you have handed over the vehicle documents to your logbook loan lender, you will receive your loan by cheque, which should take a few days to clear at your bank.
Some logbook loan providers are able to offer a quicker service, giving you the loan in cash, but this often comes at an additional fee of up to around 4% of the loan.
Your repayment period on a logbook loan is likely to be around 18 months, but some providers will let you repay the logbook loan earlier.
Make sure you know how the agreement works as some logbook loan lenders will ask you to pay back only the interest for most of the duration of the repayment period, but then ask for the rest back in the last few payments. This means you would need to have saved up your repayments in anticipation of this.
Cheap logbook loans
There are some websites that allow you to compare logbook loans, and some websites where you may even be able to get a logbook loan instant quote.
However, when people search for cheap logbook loans, they are unlikely to find what most of us would consider to be ‘cheap’, be it online or on the high street. Logbook loans are notoriously expensive and come attached with a higher risk than most other types of loans and credit cards.
What’s more, you could be paying back more in interest than you initially borrowed when taking out a logbook loan. Many logbook loans have an APR of around 100% to 300%, and sometimes much higher.
Logbook loans alternatives
Logbook loans are some of the most expensive ways to borrow money, so it’s certainly worth your time and money shopping around for a cheaper alternative.
Unsecured personal loans are generally cheaper, but can be harder to get if you have a bad credit score or have had trouble being approved for a loan in the past.
If you are a homeowner then a secured loan still carries a lot of risk, as it means your home could be repossessed if you fail to keep up with repayments, but they are still much cheaper than logbook loans. However, they are more suited if you want to borrow upwards of £10,000.
If you are looking for a cheaper short term financing alternative to logbook loans, then consider taking out a bad credit credit card as the lenders are more likely to accept people who have been rejected before.
Alternatively, ask your bank to see if they will give you an overdraft with more flexible terms or take a look at our bad credit loans comparison table.
The last thing you want is to be straddled with debt you may not be able to afford six months or 12 months down the line, and then to have your car seized, so do your research and read up on our guides on how to improve your credit score before even thinking about comparing logbook loans.
- Best secured loans / homeowner loans – What are secured, or homeowner loans? If you’re shopping around for the best secured homeowner loans read on.
- Loans for bad credit and poor credit – Bad credit history? Bad credit loans are designed for people with poor credit
- Guarantor loans – If you have a bad credit score or low deposit getting a loan can be difficult. That’s where a guarantor loan could help.