Guide to Logbook Loans
Logbook loans are loans that are secured against your vehicle. If you keep repaying the loan you keep your car. If you fail to repay the loan, the lender takes your car.
Key Features of Logbook Loans
- You can normally borrow from between £500 to £50,000 depending on the value of your car. Many lenders will only lend 50% of the value of your car.
- When you take out the loan you hand over the logbook of your car or vehicle registration document. You will also sign a credit agreement and a bill of sale. This means that you can still drive the car but only if you make all loan repayments.
- Some lenders pay in cash, whilst others issue logbook loans by cheque which will take several days to clear.
- Repayments on your loan are made in instalments usually over 1 to 5 years. Regular payments may however only be paying the interest off, a final payment may involve you then repaying the loan itself.
- Some lenders will also lend against motorcycles and vans.
- In England and Wales loans are secured against the vehicle by issuing a bill of sale. This means that in effect you transfer ownership of your vehicle to the lender until the debt is repaid in full. You are allowed to drive the car but you cannot sell the vehicle as ownership has passed to the lender.
- You will need to get along to a branch of a lender that offers logbook loans to show them your vehicle
- Interest is often high with these loans,normally around 400%APR and is charged on the loan amount each week.
Logbook Loans in Scotland
Bills of sales do not exist in Scotland so lenders here have replaced them with hire purchase agreements. Essentially you sell the vehicle to the lender then hire it back using a hire purchase agreement.
To get a logbook loan most lenders will require you to prove your identity and address, produce vehicle documentation and provide details of income and expenditure.
Concerns about Log Book Loans
The key thing to remember here is that if you do not keep up repayments you could lose your car. In addition the interest is much more expensive than normal unsecured loans so you could end up in even more debt.
Citizens Advice have warned about logbook loans recently as some people who have purchased second hand cars have unwittingly bought cars with outstanding logbook loans. In effect they have then inherited the debt, even though they didn’t borrow the money in the first place.