Warning: late repayments can cause you serious money problems. See our debt help guides.
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 if you default on the loan.
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.
How do logbook loans work?
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.
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 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.
How to compare logbook loans
If you do plan on taking out a logbook loan, here are some 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. Generally, the longer the loan term, 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 seeks to repossess your car. Most lenders won’t seek to repossess your vehicle until you’ve missed several repayments, but it’s important to know when this process will begin.
Finder survey: What aspects of car finance would matter most to you when choosing it?
| 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% |
Source: Finder survey by Censuswide of 1032 Brits, December 2023
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), the lender handed the car’s ownership back to him.
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. 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.
Alternatives to logbook loans
- Short term loan
- Bad credit personal loan
- Credit card
- Overdraft
- Loans from family/friends
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. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
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