Taking out a loan against your car may be a quick way to get cash. But logbook loans are among the most expensive and risky types of loans. This guide explains how logbook loans work and why it’s a good idea to consider other options.
How do logbook loans work?
A logbook loan is a type of secured loan. It lets you borrow money against your car. This means your lender may take away your car if you don’t keep up with the repayments.
When you take out a logbook loan your lender will ask you to hand over your logbook (or ‘vehicle registration certificate’). You’ll also need to sign a bill of sale that gives the lender temporary ownership of your car. Bills of sale aren’t legally binding in Scotland – so if you see a logbook loan advertised there, it’s likely to be another type of car finance.
You can still use your car while making payments on your logbook loan. But you’re not allowed to sell your car or get your logbook back until the loan is repaid.
How do I make payments on a logbook loan?
How often you repay your logbook loan depends on the terms of your agreement. For example, some lenders may ask for weekly payments. Others may ask you to pay only the interest on the loan each month and the full debt at the end of the loan term.
What can I use a logbook loan for?
You can normally use a logbook loan for whatever you like. There may be exceptions such as gambling. Check the terms of your loan agreement to be sure.
People often use logbook loans to get cash in a hurry. It’s important to slow down and think carefully about whether it’s worth the risks and cost.
How much can I borrow with a logbook loan?
Logbook lenders usually offer loans between £500 and £50,000. It depends on a few things including how much your vehicle is worth. You’ll typically get a smaller logbook loan for an older or cheaper car. Some logbook lenders may only lend you up to half of your vehicle’s value.
How much does a logbook loan cost?
Logbook loans are an expensive form of credit – they’re often even more costly than payday loans. The cost depends on things like how much you borrow and the interest rate. Logbook loans often have an interest rate of around 400%. So your loan may end up costing you several times the amount you borrowed.
How long is a logbook loan term?
Most logbook loans last for 78 weeks but they can be longer depending on the lender. You’re allowed to pay back your loan earlier if you want to. But you may have to pay extra charges if you repay more than £8,000 in any 12-month period.
What do I need to get a logbook loan?
You’ll generally need to own a working, insured car. Be ready to hand over your logbook (or ‘vehicle registration certificate’). Your lender will ask for proof of income such as payslips or bank statements. They may also ask for your MOT and car insurance documents, photo ID and proof of address. Remember, each lender has their own process when you apply for a loan.
Can I get a logbook loan with bad credit?
Yes, if you have poor credit, it’s often easier to get a logbook loan than other types of borrowing. Many logbook lenders don’t do a credit check at all. This is because their loans are designed to attract people with low credit scores who may otherwise be refused credit.
Lenders usually think people with bad credit records are less likely to pay them back. That’s why logbook loans are secured against your car and have a higher interest rate – it’s a way for lenders to reduce the risk of losing their money.
Can I get a logbook loan without proof of income?
No, you have to have proof of income to get a loan against your car. Lenders must ask for this evidence to check if you can afford the repayments.
Remember to do your own calculations to see if you can afford a logbook loan. For example, you may have a big expense coming up that lenders don’t know about.
Can I get a logbook loan on a financed car?
Lenders are less likely to give you a logbook loan if you’re still making payments towards your vehicle. But they may consider it if your finance agreement is ending and you only owe a small amount. You’ll need permission from your existing car finance provider.
What happens if I miss my logbook loan repayments?
If you don’t keep up with your logbook loan payments, your lender may take away your car and sell it to get their money back. If your car sells for less than you owe, you’ll have to pay the difference.
Lenders ask you to sign a bill of sale when you take out a loan against your car. As long as they registered the bill with the High Court, they won’t have to go to court to take away your vehicle. But they must warn you and give you a chance to stop it – you’ll get 14 days to catch up on your missed payments.
Is getting a logbook loan a bad idea?
Missing your logbook loan payments can have serious consequences. You may lose your car and end up in a lot more debt than you bargained for. You won’t get the same consumer protection as you would with other forms of credit such as personal loans.
Logbook loans are expensive and lenders may accept you without checking your credit score. So you may be more likely to have trouble affording the repayments. Getting a loan against your car is rarely worth the risk and cost. It’s often better to find another way.
What are my alternatives to logbook loans?
Firstly, it’s worth trying to get money without borrowing. See if you can cut costs, find extra work or sell something you own. The government may be able to help you with heating, housing and other living costs.
Still want to borrow? Consider getting a form of credit that’s cheaper and offers more protection such as a low-interest loan. If your credit score is low, you may be able to get a bad credit loan or boost your chances of acceptance by improving your score.
You may want to ask for help from friends or family. If borrowing from them isn’t an option, they may be able to help you get a guarantor loan. A guarantor is someone who promises to make the repayments if you can’t. This helps reduce risk for the lender meaning they may be more likely to approve you.
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