Logbook loans

If you have bad credit, logbook loans allow you to use your car as security against a loan – protecting the lender from losing money in the event you default on the loan.

Last updated:

With logbook loans, you’ll legally sign over ownership of your car for the duration of your loan. Although you’ll still be able to use your car, the lender will be able to repossess it without a court order if you fall behind on your repayments.

The risk of losing your vehicle plus the high interest rates attached to logbook loans are two reasons why you should look at other borrowing options first.

Varooma Logbook Loan

Varooma logbook loans

  • Logbook loans from £500 to £50,000.
  • Borrow up to 70% of the trade value of your car.
  • Money in your bank account even within 1 hour of approval.

Representative example: Borrow £1000.00 over 12 months at a rate of 75% p.a. (fixed). Representative APR 209.42% and total payable £1749.96 in monthly repayments of £145.83.

Promoted

Warning: late repayments can cause you serious money problems. See our debt help guides.

How do logbook loans work?

You could potentially borrow up to £50,000 with a logbook loan, although as you’d expect, this will be dependent on the value of your vehicle. Lenders will typically let you borrow no more than 50% of its official resale value.

Once a loan is agreed, you’ll be required to hand over the V5 logbook of your vehicle (hence the name). The lender will then have a “bill of sale” registered with the High Court, which makes it lawful for the lender to repossess your car if you fail to keep up with repayments.

During the term of the loan, you’ll make regular repayments, each of which comprises the interest accrued so far and part of the original sum borrowed.

In rare cases, logbook loans can be issued on an “interest-only” basis – this means that during the term of the loan, you’ll only pay back the interest accrued, but at the end of the loan, your final repayment would comprise interest and the full sum originally borrowed.

Although interest-only loans typically make for smaller regular instalments, they are almost always significantly more expensive overall because they involve borrowing more for longer.

The circumstances under which a lender will seek repossession of a vehicle will vary, but it’s advisable to check into this before agreeing to a logbook loan. If the lender does repossess the car, the lender will sell it in order to recoup any losses.

Are logbook loans safe?

When the Financial Conduct Authority (FCA) took charge of regulating this market, it released a report revealing the tactics of several unscrupulous lenders, including a lack of eligibility checking, heavy-handed debt recovery methods and companies seeking to repossess vehicles after just one missed repayment.

Underhand tactics are rarer since then, but under the current rules, these companies can still get away with more than payday lenders, for example.

There are no caps on interest charges or late payment fees like there are for payday lenders, and logbook loans don’t fall under the category of high-cost short-term credit.

A logbook loan can potentially last over a year, yet it may still have an APR over 400% attached, so debts can be difficult to handle and the threat of losing your car could quickly become very real.

How to compare logbook loans

If you do plan on taking out a logbook loan, here are some of the key features to consider when comparing lenders.

  • Overall cost. If you only look at one factor, it should probably be this one. As a general rule of thumb, whenever you borrow money, aim for the lowest overall cost while making sure the repayment schedule is comfortably affordable.
  • Repayment amounts. The difference between the best and worst rates on the market can be vast, so shop around to keep costs manageable. As a general rule, the longer the term of your loan, the lower your monthly repayments will be but the more interest you’ll pay overall. Choose the shortest possible term that makes your monthly repayments comfortably manageable. If you miss monthly repayments, you’ll be subject to late fees and could ultimately lose your car.
  • Fees and charges. The key fee to watch out for is late fees. If these are too high, it could make getting back on track with your repayments really difficult, meaning you’ll be in danger of losing your car.
  • When a lender will seek to repossess your car. Most lenders won’t seek to repossess your vehicle until you’ve missed several repayments, but it’s important to be aware when this process will begin.

Pros and cons of logbook loans

Pros

  • Lenient lending criteria
  • Will allow you to keep driving your car and will typically only seek repossession in extreme circumstances

Cons

  • Extortionate interest rates
  • You may lose possession of your vehicle

Typical scenario

Jason urgently needed to borrow a lot of money. He had an expensive car, but a terrible credit rating. For this reason, he decided a logbook loan was best for him. After shopping around for the best deal, he handed over his logbook and received the money soon after. After successfully repaying the loan on time (including a hefty amount of interest), ownership of the car was handed back over to him.

The bottom line

The FCA has helped to clean up this market, but it’s still expensive and risky enough to be considered a last resort for the vast majority of borrowers.

Frequently asked questions

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

Read more on this topic

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site