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How Do Logbook Loans Work in the UK?
09.10.2024 by Paul H
How Do Logbook Loans Work in the UK?
Logbook loans have become an increasingly popular way for UK car owners to access short-term cash, especially for those who might not qualify for traditional credit options. In essence, a logbook loan allows you to borrow money against your vehicle. This means you can continue driving your car while the lender holds the logbook (V5C) or a copy, essentially acting as security for the loan. If you default on payments, the lender has the right to seize and sell the vehicle to recover the debt.
This guide will break down the key aspects of how logbook loans work, their pros and cons, how they differ from other loan types, and everything else you need to know if you’re considering this borrowing option.
What is a Logbook Loan?
A logbook loan is a type of secured loan where the borrower uses their car as collateral. The lender holds onto the vehicle’s logbook (V5C) or a copy, but the borrower retains full use of the car. The loan is typically short-term, with a repayment period ranging from 12 to 36 months. However, the risk lies in the fact that if you fail to repay the loan, the lender can take ownership of your car.
Logbook Loans vs Personal Loans
When comparing logbook loans to personal loans, there are some important distinctions:
| Feature | Logbook Loans | Personal Loans |
|---|---|---|
| Collateral | Requires a car as security | Typically unsecured |
| Credit Check | Less stringent | Requires a good credit score |
| Loan Amount | Dependent on the car’s value | Based on income and credit |
| Interest Rates | High APR (Annual Percentage Rate) | Varies, usually lower |
| Risk of Losing Asset | Yes, if repayments are missed | No, except in secured personal loans |
| Approval Time | Fast, often within 24 hours | Can take longer |
Key Differences:
- Collateral Requirement: Personal loans usually do not require an asset as security, whereas logbook loans are secured against your vehicle.
- Interest Rates: Logbook loans often come with higher interest rates, starting with LoanOnYourCar Rep APR at 202% and rising with other direct lenders to over 400% Rep APR, making them a costly option in the long run.
- Eligibility: Logbook loans are more accessible to those with poor credit, whereas personal loans require a credit check, which might limit access for people with low credit scores.
Can I Get a Logbook Loan with Bad Credit?
One of the advantages of logbook loans is that they’re available to individuals with bad credit. Since the loan is secured against your vehicle, lenders are less concerned about your credit history and more focused on the value of your car and your ability to repay. This makes logbook loans an attractive option for those who have been turned down for other types of credit.
Are Logbook Loans Safe?
The safety of logbook loans depends largely on your ability to repay. While they are legal and regulated in the UK, they come with significant risks:
- High Interest Rates: The APR on a logbook loan can be extremely high, sometimes reaching 300-500%, which can lead to repayment difficulties.
- Risk of Losing Your Car: If you default on the loan, the lender has the right to repossess your vehicle. They can sell it to recover their money, even if the sale doesn’t cover the full loan amount.
- Unregulated Lenders: It’s essential to deal with a reputable, regulated lender to avoid being caught in unfair terms or predatory lending practices.
What Documents Are Needed for a Logbook Loan?
To apply for a logbook loan, you’ll need to provide the following documents:
| Required Documents | Explanation |
|---|---|
| Logbook (V5C) | Proof of ownership of the vehicle |
| Proof of Identification | Passport or driving licence |
| Proof of Address | Utility bill or bank statement (dated within 3 months) |
| MOT Certificate | Valid MOT to ensure the car is roadworthy |
| Insurance Documents | Proof that the car is insured |
| Proof of Income | Bank statements or payslips showing your income |
In addition to these, some lenders may ask for a spare set of keys as further security for the loan.
How to Apply for a Logbook Loan Online
Applying for a logbook loan online is straightforward. Most companies provide an online application form where you can fill in your details, including information about your car, your financial situation, and your loan requirements. Here’s a step-by-step guide:
- Choose a Reputable Lender: Start by researching reliable lenders that are authorised by the Financial Conduct Authority (FCA).
- Fill in the Application Form: Provide all required details, including your car’s make, model, and year, as well as personal and financial information.
- Submit Your Documents: Upload the necessary documents, such as your logbook, proof of ID, and income details.
- Receive a Loan Offer: Once your application is reviewed, the lender will offer you a loan amount based on the value of your vehicle.
- Sign the Bill of Sale or Hire Purchase Agreenent with LoanOnYourCar: If you accept the loan, you’ll need to sign a Bill of Sale, which gives the lender temporary ownership of the vehicle.
- Receive the Funds: After the paperwork is complete, you’ll receive the loan amount, typically within 24 hours.
Logbook Loan Eligibility Requirements
To be eligible for a logbook loan in the UK, you need to meet the following criteria:
- Age: You must be at least 18 years old.
- Ownership: You must own the vehicle outright, or have very little remaining finance on it.
- Car Condition: The vehicle must be in good working condition and roadworthy.
- Insurance: The car should be fully insured.
- UK Residency: You need to be a UK resident with proof of address.
- Income: You need to have a regular source of income to show you can repay the loan.
Best Logbook Loan Companies
Several companies provide logbook loans in the UK, but it’s essential to choose a reputable one that is authorised by the FCA. Here are some top companies based on customer reviews, rates, and terms:
| Company Name | Interest Rate (APR) | Maximum Loan Amount | Customer Rating (Out of 5) |
|---|---|---|---|
LoanOnYourCar | 84% | £250000 | 4.9 |
| Car Cash Point | 96% | £100,000 | 4.5 |
| Logbook Loans 247 | 120% | £50,000 | 4.5 |
| Elogbook Loans | 96% | £100,000 | 4.7 |
Alternatives to Logbook Loans
While logbook loans may seem attractive, they are not the only option available. Some safer and more affordable alternatives include:
- Personal Loans: While requiring a better credit score, these loans often come with lower interest rates and no risk of losing your car.
- Credit Union Loans: Many local credit unions offer affordable short-term loans to their members.
- Secured Loans: For larger amounts, a secured loan on a different asset (such as property) might be a better choice.
- Peer-to-Peer Lending: Borrow from individual investors via platforms that match borrowers with lenders.
- Family and Friends: If feasible, borrowing from friends or family may be a more flexible and interest-free option.
Pros and Cons of Logbook Loans
| Pros | Cons |
|---|---|
| Accessible to individuals with bad credit | High-interest rates and fees |
| Quick access to cash, often within 24 hours | Risk of losing your car if you default |
| No stringent credit checks | Interest accumulates quickly |
| Continue to use the car | Can be difficult to repay in the long term |
Web Ratings
The popularity of logbook loans varies depending on user experiences and reviews. Here's an overall view:
| Category | User Rating (Out of 5) |
|---|---|
| Ease of Application | 4.5 |
| Interest Rates | 2.8 |
| Customer Service | 4.0 |
| Transparency | 3.6 |
| Repayment Terms | 2.9 |
Frequently Asked Questions (FAQs)
1. Can I apply for a logbook loan if my car is still under finance?
In most cases, no. You need to own your vehicle outright or have very little finance left on it.
2. What happens if I miss a payment?
If you miss a payment, the lender may repossess your vehicle. It’s important to communicate with the lender if you're having trouble repaying.
3. Can I repay my logbook loan early?
Yes, many lenders allow early repayment, but be sure to check for any associated fees.
4. How is the loan amount determined?
The loan amount is based on the value of your car, usually around 50-70% of the vehicle's worth.
5. Do I need a good credit score to get a logbook loan?
No, logbook loans are available to individuals with bad credit as they are secured against your car.
6. How long does it take to get the loan?
The process is usually fast, with funds available within 24 hours after approval.
7. What happens if my car is repossessed?
The lender will sell the car to recover the loan. If the sale doesn’t cover the full amount, you may still owe the remaining balance.
8. Can I sell my car if I have a logbook loan?
No, you cannot sell the car while the loan is active, as the lender technically holds the vehicle's ownership.
9. Is my car at risk if I make all payments on time?
No, as long as you keep up with repayments, you can continue using the car without issue.
10. Are there any upfront fees?
Some lenders may charge administrative fees, so it's important to clarify all costs before signing.
For anyone considering a logbook loan, LoanOnYourCar.co.uk offers a trusted, reliable option that prioritises customer care and transparency.
feel free to reach out, and we’ll help you get the answers you need. Call the LoanOnYourcar.co.uk sales team on 0333 577 5000.
If you would like to see our legal contractual documents, these are available at www.loanonyourcar.co.uk.
Representative APR (Variable) Example:
Representative Example:
If you borrow £1,000 over 36 months at a flat rate of 84% per annum [fixed] with a Representative 204.2% APR you will make 36 monthly payments of £97.98, making a total amount repayable of £3,592.28 including £40.00 document fee and £25.00 Option To Purchase fee. The total charge for credit is £2,660.00. Logbook Loan repayment length from 18 to 60 months. The maximum APR is 389.1%.
Your log book loan is secured against the vehicle, and missing payments could put the car at risk of repossession.
Warning: Late repayment can cause you serious money problems. For help go to moneyhelper.org.uk
