With logbook loans, you legally sign over ownership of your car for your loan’s duration. You can still use your car, and the lender cannot 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 2 reasons to look at other borrowing options first.
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You could potentially borrow up to £50,000 with a logbook loan from a lender. Although, as you’d expect, this will depend on your vehicle’s value. Lenders typically let you borrow no more than 50% of its official resale value.
Once a loan is agreed upon, 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 loan term, you’ll make regular repayments, each comprising 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 loans’ term, you’ll only pay back the interest accrued. However, 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 seeks repossession of a vehicle vary, so check this before agreeing to a logbook loan. If the lender does repossess the car, the lender will sell it to recoup any losses.
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 have been 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.
If you do plan on taking out a logbook loan, here are some key features to consider when comparing lenders.
| Response | Male | Female |
|---|---|---|
| Monthly cost | 30.98% | 28.16% |
| Interest rate | 27.45% | 23.95% |
| I would not choose car finance | 22.01% | 27.26% |
| Overall cost | 25.82% | 21.23% |
| Level of deposit required | 14.67% | 16.57% |
| Flexibility on repayments | 16.03% | 13.7% |
| Don't know | 7.61% | 15.06% |
| Customer service | 14.95% | 8.89% |
| Level of early repayment charges | 13.32% | 7.83% |
| Whether there's an arrangement fee | 11.96% | 8.58% |
| Provider reputation | 8.97% | 9.19% |
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), the lender handed the car’s ownership back to him.
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. Interest rates are often extremely high with logbook loans, and you’re at risk of losing ownership of your vehicle, so it’s best to look at alternative finance options first.
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