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.
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.
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.
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:
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.
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.
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.
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.
The logbook lender should provide you with a customer information sheet, which will tell you:
You can apply for a new one online from the government: https://www.gov.uk/vehicle-log-book.
No, while you have your logbook loan outstanding with the lender, you do not own the vehicle and therefore cannot sell it.
Yes, motorbikes, cars and vans can be used as security for a logbook loan.
Your lender can only charge you what it costs for them to administrate the missed payment.
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.
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.
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.
