Logbook loans – everything you need to know
Logbook loans are growing in popularity in the UK, as they offer many people a viable alternative to payday loans. Here we outline exactly what a logbook loan is, how to get one, how to pay one back and how to get the best deal…
A logbook loan, sometimes referred to as a V5 loan, is a type of secured lending based on the value of your car.
The lender of a logbook loan effectively owns you vehicle until you have paid the loan back. You will be able to keep using your car as normal, as long as you continue to keep paying back the loan.
To take out a log book loan the borrower transfers ownership of their car, van or motorbike via a ‘bill of sale’.
When you take out a logbook loan you will be requested to provide the lender with your vehicle’s logbook or vehicle registration document – most commonly the V5 form.
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Depending on the value of your car, with a logbook loan you can borrow as little as £250 or as much as £150,000.
As well as how much your vehicle is worth, the lender will also take into account your credit score and how much you can afford to pay back every week/month.
Perhaps more important than how much you can loan is how much you will have to pay back with a logbook loan…
How much your logbook loan ends up costing you depends on the APR you are charged, which stands for Annual Percentage Rate and is basically the interest charged on the total loan amount, and the length of time you choose to payback the loan.
Logbook loan lenders tend to charge lower APR’s than payday loan lenders, but they are still quite high so this should be considered before taking out a loan.
For example: if the APR is 400% and you take out a loan of £1,500 and pay back £55 a week for 78 weeks, you will repay £4,250 in total.
Logbook loans are best suited to people with bad credit who are looking for a fast alternative to the often much more expensive payday loans.
Many logbook loan providers promise fast approval and loans paid out on the same day. There are also options to pay off the loan earlier than the agreed term, and to switch loans to providers charging less interest.
A lot of lenders also claim they will come out to you to deal with the V5 transfer.
In order to qualify for a loan, most providers request that your vehicle is worth more than £700, is fully taxed and roadworthy (i.e. not the subject of a SORN, insured, MOT’d etc…) and that you live in England, Wales or Northern Ireland.
Before you take out a logbook loan it’s important to consider the following:
- The APR of logbook loans can be quite high, so if possible you should plan to pay it off as quickly as possible
- Some lenders charge extra for any repayment over £8,000 in a 12-month period – so be sure to check the small print first
- It can sometimes be difficult to keep a track of how much you owe as some lenders request weekly payments and some do not take Direct Debit – so don’t rely on them to keep you updated
- You can ask for ‘statement of account’ to see exactly how much you’ve paid back
- The amount you can loan is based on the value of your car, so it can be worth getting it independently valued first
- You may still be able to get a logbook loan if your car already has finance against it – but this will usually only be the case if the existing finance agreement will soon be ending and the amount outstanding on it is quite low
What happens if you can’t pay back your logbook loan?
If you fail to meet the repayments on your logbook loan then lenders have the right to instruct bailiffs to seize your vehicle, although most won’t take that action (or won’t go as far as selling your vehicle) until you failed to meet several repayments.
As per the law, the lender is required to send you a default notice first which gives you 14 days to respond.
If you are currently in this position then do not ignore the problem. It is a good idea to get free debt advice to see exactly what your options are.
Learn more about logbook loans with these Frequently Asked Questions…
Can I get a logbook loan if I have poor credit?
You may still be able to get a logbook loan if you have a poor credit history, provided you can demonstrate positive credit intent. Some lenders can even approve you if you have had past CCJs to your name. However, if you have an active bankruptcy, IVA’s (Individual Voluntary Arrangements) or current Debt Management Plans in place then you may find it difficult to be approved for a log book loan.
Will the lender carry out a credit check?
While reviewing your application logbook loan lenders will usually only carry out what is called a ‘soft credit check’ which doesn’t show up on your credit history. However, it is worth double-checking this with the lender before you proceed with an application.
Can I get a logbook loan if I am self-employed?
Yes, you will just have to provide evidence of your income e.g. company accounts, payslips, bank statements etc…
Is my car too old for a logbook loan?
Typically lenders will ask that your car is no older than 10 years old in order for it to be the subject of a logbook loan, although every case is judged on its own merits so you may still be able to get a loan if your vehicle is older.
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