Logbook Loans | 9 things to know before you apply | moneyfacts.co.uk

Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 12/02/2020

At a glance

  • A logbook loan uses a vehicle as security for a loan.
  • Try to find a lender who is a member of the Consumer Credit Trade Association (CCTA).
  • Make sure you look carefully at your loan agreement, bill of sale and customer information sheet.

What is a logbook loan?

A logbook loan is when you use your vehicle as security to obtain a loan. These types of loans are usually expensive and carry the risk of losing your vehicle if you cannot keep up with the repayments. The lender will own your vehicle until the loan is paid back and you can continue to use your vehicle during the loan.

How much can I borrow with a logbook loan?

Logbook loans start from £50 and the amount you can borrow depends on the value of the vehicle you intend to use for security, as well as your credit history. In general, lenders will only lend up to half the value of the vehicle.

How does a logbook loan work?

Applying for a logbook loan is a similar process to applying for a standard personal loan and consists of a loan contract between you and the lender. However, unlike a personal loan, you will need to show that you own the vehicle. You may be asked to show the logbook (V5) or registration documentation. Even if this is not requested, the loan contract does commit you to losing the vehicle if you do not repay the loan.

You will be asked to sign a loan credit agreement and a bill of sale. A bill of sale recognises the lender now owns the vehicle, but you are allowed to use it as long as you make your loan repayments. The bill of sale must be registered to the High Court by the lender if it wishes to repossess your vehicle. You can check if this has been registered by applying to the Royal Courts of Justice. Their address is Queen’s Bench master’s support section, Royal Courts of Justice, Strand, London, WC2A 2LL.

You may have to pay a fee for this information.

Logbook loans are only available in England, Northern Ireland and Wales. In Scotland, you may be offered a hire purchase or conditional sale instead.

Find a lender that is a member of the Consumer Credit Trade Association (CCTA)

The CCTA is a trade body that has a code of practice for those lenders that use bills of sale as part of their lending. When you use a lender that is a member of the CCTA, it should follow the rules set out under its code of practice, and these are more beneficial to consumers than the standard requirements under law.
This includes a requirement for members:

  • To inform you that you can use the car or vehicle to settle your debt if you get behind on your payments (even if it is worth less than the value of your car).
  • To protect potential buyers of a vehicle with a logbook loan by registering the bill of sale with a reputable vehicle registration organisation within 24 hours of the agreement being signed (this will show the vehicle has a bill of sale against it).
  • To tell you of any charges for missing a payment.
  • To offer you payment options should you fall behind with your loan repayments.
  • To not start a repossession unless you have missed the last two monthly payments or four weekly payments and if an agreement for a repayment plan cannot be achieved.
  • To not sell the vehicle for 14 days to give you time to offer a way to pay for the car, if the lender does repossess it
  • To not take any action on your account for 30 days while you negotiate a repayment arrangement, if you have an adviser helping you due to being behind with your payments.
  • To try to sell your car for the highest possible price to minimise your outstanding debt.

 

Find out which lenders would accept you for a personal loan

Find out which lenders would accept you for a personal loan. It’s quick to do and there’s no impact on your credit score. This service is provided by our preferred loans broker Loans Warehouse.

Checklist to getting a logbook loan

Here are five steps to getting a logbook loan:

1. Evidence of ownership – have your vehicle logbook/V5 to show you own the vehicle.
2. No existing finance – you cannot owe any money for the vehicle.
3. Get quotes for logbook finance – look for lenders that are members of the CCTA.
4. Review the documentation – the logbook lender should summarise the key facts of the agreement and give you a customer information sheet – this sets out the lender’s responsibilities under the agreement.
5. Sign the documentation – this includes signing a loan contract and bill of sale.

 

What alternatives are there to a logbook loan?

If you are a homeowner and looking to borrow a larger sum of money, you could consider a secured loan against your property. Alternatively, for those seeking a smaller amount, a personal loan may be a better option.

FAQs

What is a bill of sale?

A bill of sale is a certificate that agrees the transfer of ownership of your vehicle to the logbook lender and allows you to continue to use it.

What is a customer information sheet?

The logbook lender should provide you with a customer information sheet, which will tell you:

  • A definition of a bill of sale
  • The expected behaviour of the lender
  • Yours and the lender’s responsibilities.

I have lost my logbook – what should I do?

You can apply for a new one online from the government: https://www.gov.uk/vehicle-log-book.

Can I sell my car while I have a logbook loan against it?

No, while you have your logbook loan outstanding with the lender, you do not own the vehicle and therefore cannot sell it.

Can any vehicle be used for a logbook loan?

Yes, motorbikes, cars and vans can be used as security for a logbook loan.

What can a lender charge me for missing a payment?

Your lender can only charge you what it costs for them to administrate the missed payment.

What happens if my car is repossessed?

If your logbook lender is a member of the CCTA, then your car can only be repossessed if you have missed your last two monthly payments or four weekly payments and cannot agree a repayment plan with your lender. The lender must comply with the Consumer Credit Act 1974 and send you an arrears notice and a default notice before ending the agreement to repossess the vehicle. You have 14 days from the default notice to repay your missed payments to stop the repossession process.

Your lender can repossess your car without having to go to court if they have chosen to end your agreement and they have a bill of sale registered. Depending on the terms of the agreement, they may be able to access a locked premises or garage to obtain the vehicle. If your lender asks you to return the car and you fail to do so, they can ask for a ‘return of goods order’ from the court. This means they can ask bailiffs to remove your car.

All logbook lenders must wait a minimum of five days before selling your car and 14 days if they are a member of the CCTA.

What happens if I have any debt left after my car is repossessed?

After the lender repossesses your car, they must sell this for the highest market price they reasonably can. If there is any debt left after the sale, then the lender could ask the court for a charging order. A charging order means the lender can look to recover their debt from the sale of your home.

Any monies you owe after the sale of your car are classified as a non-priority debt and you can suggest an amount you wish to pay back to suit your budget. If the lender does not agree with your offer, then they can apply for a court order.

Moneyfacts tip

Moneyfacts tip Michelle Monck

Logbook loans are expensive and interest rates are higher than most personal loans. Loans Warehouse, our preferred loans broker, offers a free check to see which other lenders might accept you for a loan without risking your vehicle.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

At a glance

  • A logbook loan uses a vehicle as security for a loan.
  • Try to find a lender who is a member of the Consumer Credit Trade Association (CCTA).
  • Make sure you look carefully at your loan agreement, bill of sale and customer information sheet.

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