How much do you need?
What are Logbook Loans?
A logbook loan is where you borrow money against a vehicle you own. It takes its name from your vehicle’s logbook and is a form of secured finance. After choosing a loan company, you hand over the logbook for your vehicle and the loan provider uses it as security against repayments.
Lenders use your logbook as a secured asset in case you face problems repaying what you borrowed. It provides them with the confidence that they can recoup their losses should the worst happen.
During the process, you will have to sign an agreement. The document is named a Bill of Sale, which gives the provider legal ownership of your vehicle.
You will still be able to use your vehicle as normal. Once the total amount has been repaid, your logbook is sent back to you, along with full legal ownership.
Why choose a Logbook Loan?
It can be difficult to secure finance from traditional banks and building societies. Particularly, if your credit score is less than perfect. If you own a vehicle, a logbook loan can be a good way to raise finance, even if your credit score is lower than average.
Your chosen lender will carry out affordability checks to assess your ability to make repayments. This means that even if you are self-employed, it won’t stop you from taking out a loan.
Lenders need to see you have a regular income and the amount left after your expenditures is enough to cover your payments. If you can prove this, you have a good chance of acceptance.
Do I Qualify for a Logbook Loan?
The eligibility criteria for logbook finance includes:
Being 18 years old or over
A full time UK resident
Owning a vehicle that is free (or almost free) of finance
Having a vehicle that is taxed, MOT’d and insured
Ability to show you can afford repayments
Supplying relevant documents
How do I apply for Logbook Loans?
You can apply for logbook loans online or on the high street with a company dealing with logbook loans for motorcycles and other vehicles. There are a range of providers available, yet it is important you choose one registered with the Financial Conduct Authority (FCA). The FCA ensures lenders do not offer you credit if you are not in the position to pay it back.
For online providers, there will be an online application form for you to fill in. At a physical location these will likely be physical forms you complete in the office.
A credit check and affordability assessment are then carried out. When approved, you will need to sign a credit agreement highlighting your repayment schedule and loan terms. Next, you will sign a bill of sale and hand over your logbook.
It is important you ensure you are able to afford your loan. Failing to meet your repayments can result in you falling into financial difficulties.
How Much money can I Borrow?
How much you can borrow depends largely on the value of your vehicle and your personal needs. The greater the value of your vehicle, the more you may be able to borrow.
With some companies, you can borrow up to half of your vehicle’s value. Also, you can be flexible with when you make your repayments. You could pay over a few months or anywhere up to 36 months.
The Typical Annual Percentage Rates (APRs) of logbook loans are 100% or higher. Here is an example.
If you borrowed £1,000 over 18 months at a rate of interest of 111.3% per annum (fixed) over 18 months (189.9% APR Representative) you would make 18 monthly payments of £116.31 paying back a total of £2,093.58.
With some loan agreements, you may only be paying interest during the repayment course. That is, until the final month of your contract, where you should pay the amount originally borrowed.
Loan terms like this show how vital it is to understand how your agreement works. Make sure you are clear on what your responsibilities are before committing.
Advantages of Logbook Loans
The benefits of logbook finance include:
You can borrow a larger amount of money
The repayment terms extend over a longer period of time
You can usually repay your loan early without penalties. (check with your provider first)
Easier to secure finance with a poor credit history
Disadvantages of a Logbook Loan
Some of the pitfalls of logbook loans include:
You could lose your vehicle if you can not make repayments
You need to be the legal vehicle owner with no outstanding finance
Rates of interest can be more expensive than unsecured loans