What is a logbook loan?
A logbook loan is a way of borrowing money from a provider for a short period of time by using your car or vehicle as security against the loan.
If you’re unable to repay the logbook loan for any reason, your car may be kept by the lender and sold to settle any outstanding debt you owe.
During your loan term, you hand over the ownership of your car to the loan provider, although you’ll still be able to keep and drive your vehicle. Once you’ve repaid your loan in full, you'll regain full ownership of your car again.
Logbook loans are only available in England, Wales and Northern Ireland.
How do logbook loans work?
You'll need to prove you’re the registered keeper of your vehicle when you take out a logbook loan, by handing over your car's logbook (V5C) or vehicle registration document.
For the duration of your loan, the lender will keep hold of your vehicle’s logbook and owns your vehicle, but you can still drive it and use your car as if you still owned it.
Like other loans, you'll need to stick to the loan terms and keep making repayments until your loan is paid back in full. Once you’ve repaid the loan, you'll get your vehicle’s logbook or registration documents back and regain full ownership of your car.
What is a bill of sale?
As well as signing a credit agreement when you take out a logbook loan, you'll get a separate document called a ‘bill of sale’.
A bill of sale certificate is evidence that ownership of your car has been transferred to the lender for the duration of your loan.
This certificate needs to be registered with the High Court, so if it’s not registered, the lender must go to court if they wish to repossess your vehicle if you aren’t able to repay your loan.
How much can I borrow?
Typically, logbook loans allow you to borrow between £500 to £50,000.
However, most loan providers will only lend between 50% and 70% of the value of your car, so your borrowing limit will depend on how much your car is worth. This is because your vehicle is used as collateral and is sold to cover your debt if you’re unable to repay the loan in full.
For this reason, you may need to get your car independently valued before a logbook lender will agree to lending you money.
What can a logbook loan be used for?
A logbook loan can be used in the same way as a personal loan which means it can be used for anything you need once the money is in your account.
Logbook loans typically have high-interest rates, so they can be an expensive way to borrow money. Ideally, you should only use them for short-term borrowing or emergencies.
How do I get a logbook loan?
You can find logbook loans online directly from a loan provider who specialises in them or use a comparison website to find the right logbook loan for you.
It's important to apply for a loan with a lender that's authorised by the Financial Conduct Authority.
Am I eligible for a logbook loan?
To get a logbook loan you'll need to meet specific criteria, for instance, you'll need to be:
- Over 18 years of age
- A UK resident
- The owner of a vehicle and have your name on the logbook
The vehicle will need to be roadworthy, in reasonable condition and have:
- No outstanding finance on your vehicle
- A valid MOT
- Proof of car insurance
- Proof you're up to date with your road tax payments
What documents do I need for a logbook loan?
- Your vehicle logbook (V5C)
- MOT certificate
- Insurance certificate
- Proof you've paid your road tax if your vehicle is eligible for road tax
- Photo ID, e.g. passport or driver's licence
- Proof of address, e.g. utility bills, bank statements
- Proof of income, e.g. payslips, letter from employer
Can I get a logbook loan with bad credit?
Getting logbook loans with bad credit is possible because you're securing the loan with your car. Using your vehicle as collateral means you're perceived as less of a risk to the lender if you’re unable to repay what you owe.
However, logbook loans for bad credit will still need to be repaid within the terms of your credit agreement.
To minimise their risk of lending to you, a lender may carry out affordability checks to make sure you can afford the repayments of a loan. This means the loan provider will look at your income, outgoings and any other outstanding debts you may have before approving you for a loan.
What happens if I don't pay my logbook loan?
If you can't make the repayments of your loan, your loan provider is entitled by law to sell your vehicle to recover any money you are unable to pay back.
If the lender decides to retain your car, they have to send you a default notice and give you 14 days to respond; generally, your lender won't do this unless you’ve fallen behind on several repayments.
If your car isn't worth enough to cover the outstanding debt (because of damage to the vehicle or general wear and tear), you could still be liable for the shortfall, and the loan company could take you to court to get their money back.
If you’re struggling to repay your loan, you should always contact your provider in the first instance. Burying your head in the sand is the worst thing you can do. There may be things your loan provider can do to reduce your monthly payments, but it will take you longer to repay your loan.
What are the pros and cons of logbook loans?
The best logbook loans can be a helpful way to deal with a cash shortfall if you have a bad credit rating or are unable to borrow money from your bank, but there can be some disadvantages to think about.
- Typically available for people with bad credit
- You can make repayments on your loan on a weekly basis
- You may not need a UK bank account
- Interest rates can be higher than other loans
- There may be charges for paying off your loan early
- The amount you can borrow depends on the value of your car
- Your car will be seized and sold if you can't pay back your loan in full
Are there any alternatives to logbook loans?
Most high street banks and online lenders offer low interest personal loans. If you apply for an unsecured loan with your own bank, approval can be instant, and you'll get the money quickly, but you'll need a good credit score to get the best rates and you’ll need to provide evidence that you can afford to repay the loan.
Vehicle equity release
Equity release is where you sell your car to the lender, then buy it back on a hire purchase (HP) or personal contract purchase (PCP) agreement. This arrangement means your vehicle won't be at risk of seizure and you'll get better consumer credit protections.
If you received welfare benefits for over 6 months, you might qualify for a budgeting loan from the government to cover essential costs. Depending on your circumstances, you can borrow between £100 and £812 and repay the money without added interest, so you only pay back what you’ve borrowed.
This type of loan is when someone else, usually a family member or friend, guarantees your loan repayments if you can’t make them yourself. You'll both have credit and affordability checks done and if you fail to repay the loan your guarantor will need to pay back what you owe on your behalf.
Credit union loans
Credit unions are not-for-profit community organisations. Their loans tend to be flexible, so you can borrow a small amount of money over a short term or repay your loan early without having to pay early repayment fees. To qualify for a credit union loan, you'll have to become a member or have savings with them.
0% credit cards
A 0% credit card allows you to pay for goods and services in store and online. A 0% credit card comes with an introductory 0% interest rate, meaning you can borrow for free for up to 25 months.
Interest rates can be high once the interest-free period ends, so you'll need to pay off any outstanding balance within your introductory offer. Typically you’ll need a good credit score to be accepted for a 0% interest credit card.
Logbook loans FAQs
Logbook lenders are regulated by the FCA, which means they're bound by strict rules, and have to carry out affordability checks and lend responsibly. This means a safe logbook loan company will carry out a hard credit check before agreeing to lend money to you, which will leave a record on your credit report.
Yes, the loan company is lawfully allowed to seize your car if you do not repay your loan within your agreed loan term. However, your lender must wait at least five days after you’ve defaulted on your loan before they can take your car away.
They’ll usually tow away your vehicle, and extra charges may be added to your debt to cover the costs of removing your car.
Once the loan company is in possession of your vehicle, your car will be auctioned to raise money to repay your loan. If the proceeds of the sale don't cover what you owe, you'll be responsible for repaying any shortfall.
All logbook loan companies should be authorised and regulated by the Financial Conduct Authority (FCA), which means they have to treat their customers fairly, provide you with appropriate products and services and value their customer's safety above their own profit or income.
No, you won't be able to sell your car if you have a logbook loan because you're not technically the owner of the vehicle while you’re still repaying what you owe. The lender will keep your car registration documents, and the bill of sale certificate shows the vehicle belongs to the loan company for the term of your loan.