Logbook loans. What is a logbook loan?
Logbook loans are designed as a finance solution for those with bad credit. The reason they are called logbook loans is that the logbook (your vehicle registration certificate, also known as your V5) is taken by the lender for duration of the loan term, temporarily resulting in the lender owning your vehicle.
How does a logbook loan work?
Logbook loans work on the basic idea that if you own a vehicle you can secure it against a loan. Throughout the course of the loan if you fail to meet your repayments ownership of your car will be at risk.
How much do they cost?
As Logbook loans are aimed at those with poor credit history rates can be quite high, ranging from around 100% APR to 500%. Loan terms range from 3 months to 5 years with available loan amounts between £300 and £25,000. The value of the loan you’re able to get with a logbook lender will depend on the value of your car. As standard practice the value of your car is worked out from the ‘book price’ (you can find this out yourself at parkers.co.uk). In some cases, outstanding finance on your car can be deducted from the overall value of the loan offered but this will depend on the value of your car.
Will I be accepted?
Acceptance criteria will vary between lenders. As a minimum, you'll have to be at least 18 years old and be able to demonstrate you can afford to meet your repayments.
If you’re considering a logbook loan and own a specialist vehicle it’s worth noting that each individual lender is different and will have varying restrictions to what vehicles they accept. Some lenders, for example, do not accept ‘prestige’ or ‘classic’ cars - bottom line, do your research and compare lenders before applying.
Should I apply for a logbook loan?
Logbook loans are designed as a solution for those with bad credit. If you have a perfect credit history then you're in the wrong place. You'll be able to get much better rates by applying for either a bank or supermarket loan where you will have access to APR’s of less than 10%.
Note that Logbook lenders take your V5 when you agree your loan. This makes them the registered keeper of your vehicle for the term of the loan and if you miss even a single payment, your car can be sold very quickly and without going through a court process. This puts logbook lenders into the lender of last resort category and it goes without saying that it’s absolutely imperative that you ensure you can make the repayments before committing to taking out a logbook loan.
Final word
If you have a poor credit history and are looking for a personal loan then a logbook loan is worth considering. Logbook loans do however come with a severe health warning. Whether or not you rely on your vehicle to get yourself to work or for the daily school run by committing to a logbook loan you’re putting your vehicle at risk. Therefore before applying for a logbook loan be sure you can safely meet the agreed repayments and compare your options. If in any doubt, do not apply.