A guide to logbook loans

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:

• 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.

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.

A guide to car financing and leasing

Unsecured car loans