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Logbook loans

Logbook loans are loans secured on your vehicle, so the lender owns your vehicle until you pay back the loan. You can keep on using your vehicle as long as you repay the loan. But logbook loans are expensive and risky and it’s best to avoid them if you can.

How do logbook loans work?

Logbook loans are available on the high street and on the internet.

You can normally borrow between £500 and £50,000, depending on how much your vehicle is worth. Although some firms will only lend up to half of your vehicle’s value.

When you take out a logbook loan, you’ll usually be asked to hand over your vehicle’s logbook or vehicle registration document.

These documents prove you’re the registered keeper of the vehicle.

But even if you don’t hand over these documents, you’re still handing over ownership of the vehicle until the loan is repaid.

Taking out a logbook loan in England, Wales or Northern Ireland

Logbook loans are used only in England, Wales and Northern Ireland.

With a logbook loan, on top of signing a credit agreement, there’ll be a separate form called a ‘bill of sale’.

This means the lender now temporarily owns your vehicle, but you’re still able to use it so long as you meet all loan repayments. You won’t be able to sell it as you technically don’t own it.

The law only recognises a bill of sale if the lender registers it with the High Court.

If it’s not registered, the lender must get a court’s approval to repossess your vehicle.

You can check if a bill of sale is registered by making a written application to the Royal Courts of Justice in London. But you’ll usually have to pay a fee.

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In Scotland, logbook loans are not available, because a bill of sale is not legally binding. But you might be offered what is called a logbook loan, which is a hire-purchase agreement or a conditional sale. As these are regulated financial products you do have protection under the Consumer Credit Act.

As with any finance agreement, it’s important to check any documentation carefully so you are fully aware of what is involved. 

Getting your loan

Most firms now use electronic payments to transfer the money into your account.

Some logbook loan companies offer a quick cash service, but they might charge fees of up to 4% of the loan for this.

You’ll also be given information which explains the key facts about the agreement, such as the length of the term and how much your repayments are, as well as details about how the lender will behave and your responsibilities.

Paying the loan back

Most logbook loans run up to 78 weeks, although by law you’re entitled to pay it off earlier if you want (and if you can afford to do so).

With some agreements, you might only be repaying the interest charges until the last month of your contract.

In the final month, you’ll be expected to repay the amount of money you originally borrowed. This means you’ll need a plan for how you’ll repay this lump-sum at the end of the agreement.

It’s important to make sure you understand how the agreement operates and you can afford the repayments.

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How much does a logbook loan cost?

Typical Annual Percentage Rates (APRs) are 400% or higher, so this is an expensive form of credit.

For example, if you borrowed £1,500 and paid £55 a week for 78 weeks, you would repay over £4,250 in total.

This means you would have paid over £2,750 in interest in order to borrow £1,500.

Cons of logbook loans

  • You could lose your vehicle if you can’t make the repayments to the loan company.
  • You don’t have the same consumer protections as with a hire purchase agreement.
  • You need to be the legal owner of the vehicle, which has to be worth over £500 usually with no finance outstanding on it.
  • The interest charged is much higher than on unsecured loans from mainstream lenders, so you could struggle to pay back what you owe.

What to think about before taking out a logbook loan

  • The APR can be very high, so it’s best to pay it off as quickly as possible.
  • There might be extra charges for  making an early repayment if you repay more than £8,000 in any 12-month period.
  • Logbook loan lenders might ask for weekly payments.
  • Some don’t take Direct Debit so it can be difficult to keep on top of how much you owe.
  • If you’re not sure how much you’ve paid back, ask for a statement of how much you owe (called a ‘statement of account’), which the lender must give you.
  • How much you can borrow depends on the value of your vehicle. A reputable lender will ask you to get it independently valued.
  • Even if the vehicle has existing finance against it, you might still be able to get a logbook loan, but generally only if your existing loan agreement is coming to an end and the outstanding amount is low (and you’ll need to get permission from your existing lender first).

If you can’t pay back your logbook loan

Logbook loan lenders have the right to use bailiffs to seize your vehicle if you don’t meet repayments.

But most lenders  won’t do so and won’t sell the vehicle until you have fallen behind with several repayments.

By law, they must send you a default notice first, giving you 14 days to make up any missed payments.

It’s a good idea to get free debt advice at this point, to see what your options are. Don’t just ignore the problem.

If the bill of sale has been registered, the logbook loan lender doesn’t need to go to court to repossess your vehicle. .

If your vehicle is sold

If the amount your vehicle  is sold for is less than what you owe, you’ll still be liable to pay the shortfall.

A logbook loan company can take you to court to get this money back.

Alternatives to logbook loans

Logbook loans can seem tempting if you need cash fast and have a poor credit rating, but there are always alternatives.

It’s best to avoid using a logbook loan.

If you do take one out, check the lender is a member of a trade body and it complies with a code of practice, specifically on logbook loans.

Credit unions

If you have a low income and you need to borrow a small amount for a short time, you might consider contacting a credit union.

Help from the government

Ensure you’re getting all the benefits you’re entitled to.

If you’re getting certain benefits, you might be able to apply for an interest-free Budgeting Loan from the Social Fund.

Alternatively, other help might be available from your local authority in England, or the Scottish and Welsh governments.

Getting help with debt

You might be thinking of or already using a logbook loan because you have debt problems. If so, speak to a free debt adviser, who might be able to help you.

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impartial help for all your money and pension choices.
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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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