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Logbook Loans

Logbook Loans can be very appealing to those with a poor credit history that need money fast. However, they can be extremely expensive, and come with the added risk of your vehicle being seized and sold if you miss payments. This guide takes you through the background of logbook loans and how much they cost, before taking you through the safer, cheaper financing alternatives.

In This Guide:

What are logbook loans?

Logbook loans are loans designed for people with a bad credit rating, that may struggle to get more conventional financial support. Logbook loans are secured using your vehicle. This makes them very risky, as failure to pay back the loan on time and in full will result in your vehicle being taken away by the lender. If your vehicle is then sold for less than the full value of the loan, you will have to pay the rest back to the lender anyway. As an example, if your loan was £2,000, but your car could only be sold for £1,000, you would still owe the lender £1,000. What makes a logbook loan even more dangerous is that you can be taken to court by the lender if you fail to pay.

Logbook loans are available online and on the high street, and they can provide fast finance for people with a poor credit history. However, they are extremely expensive, often coming with hefty interest rates. This, combined with their inherent risk, means that it is highly recommended for borrowers to look for alternatives.

How do logbook loans work?

Most lenders will lend you money in the range of £500 - £50,000. The amount you receive will vary from lender to lender, and it will depend on how much they think they could sell your car for if you fail to repay the loan. Many lenders will only lend up to half the value of your car.

To secure a logbook loan you must prove you are the vehicle’s owner, which requires you to give the lender your vehicle registration documents and the vehicle’s logbook. This step temporarily hands the ownership of your vehicle over to the lender until the loan is repaid. Given the risk of repossession, you should make sure you always carefully read the terms and conditions, particularly any deadlines the lender has set for repayment. You should also look at any penalties for missed payments.

As well as the standard credit agreement, you will have to sign a ‘bill of sale’. This is what formally hands possession of your vehicle over to the lender and must be registered with a court. If you fall behind on any payments, the logbook loan lenders can seize your vehicle by employing a bailiff and selling it to repay the loan. If the bill of sale was registered correctly, the lender does not need to go through a court to repossess your vehicle. Legally, the lender will have to give you a default notice before repossession. You have 14 days to respond to these, and this is a very good time to get some debt advice.

How much do logbook loans cost?

As mentioned above, logbook loans are designed for borrowers with a poor credit history. Having a poor credit history means you are a ‘high-risk’ borrower. This means that logbook loans can be extremely expensive, with interest rates ranging from 100% Annual Percentage Rate (APR) to 500%, with the typical rate being in excess of 400% APR. With typical terms of three to five months, these loans can get very expensive very quickly.

There are a number of websites that allow you to compare logbook loans, or even get an instant quote. However, given the high expense and risk to the borrower, logbook loans should be avoided by those looking for cheap financing arrangements. To find the best loans for you, it is a good idea to look at all the deals that the market has to offer. For more information on the alternatives to logbook loans, see below.

What are the alternatives to logbook loans?

Although logbook loans can be enticing when you need cash fast and have a poor credit history, they can be dangerous and very expensive. The market has plenty of options, and the best way to save money is by shopping around.

Unsecured loans are generally a lot cheaper than logbook loans, and don’t have the added risk of repossession of your property. However, they require a strong credit score, and so can be difficult to secure. Secured loans are available if you are a homeowner. These are also cheaper than logbook loans but carry the risk of your home being repossessed. However, they can suit those looking to borrow upwards of £10,000.

For borrowers on a low income that need a very short-term loan, it can be worth contacting a credit union. Credit unions will often require you to open an account with them first, however.

Another option is to check that you are getting all the benefits you are entitled to from the Government. You may even be eligible to apply for a Budgeting Loan from the Social Fund. You don’t pay interest on these loans, but they are only available if you receive specific benefits.