Honest advice about logbook loans

A so-called logbook loan is a legal agreement in which a person that owns a car and wishes to borrow money using it as security signs over the car’s logbook (vehicle registration certificate), to the lender in return for funds. The loan is thus secured on the vehicle via a ‘bill of sale’ even though the borrower continues to possess and use the vehicle. In the event of the borrower defaulting on the loan repayments, the lender is in a position to seize the asset and sell it to recover the money.

Logbook loans are a convenient way to obtain cash quickly without going through a credit check, although borrowers do need to prove they have a steady income and the vehicle needs to be free of finance and have up to date tax, insurance and MOT certificates. In the event of unexpected expenditure, for example, logbook loans can provide vital extra cash over the short term.

Where to get a logbook loan

As with any form of borrowing, it pays to compare terms and conditions attached to logbook loans. The companies that offer them vary considerably in the annual APR that they charge – anything from 345.9% to 498% – and logbook loans are therefore more expensive than conventional bank loans. Also, some lenders, such as Car Cash Point, will allow borrowers to pay back a loan early and to make overpayments without any extra charge or other penalty. Others, such as Mobile Money, will charge a £30 document registration fee when borrowers apply.

To be sure of getting genuine information about companies offering logbook loans try searching online using the search term “borrow money on my car” and pay attention to the details that appear on sites that are independent. They will present useful objective information, including consumer reviews and Trustpilot scores where applicable.

Getting a loan

The process of getting a logbook loan is much quicker than applying for a traditional one. Having identified the company that provides the best deal, check to make sure the payments are affordable and if early repayments are free of charge. It’s important to work out how much a vehicle is worth and to confirm that it is free of finance, or coming to the end of a payment period for any finance secured on it. With up to date MOT, tax and insurance in place the value of the vehicle will determine the borrowing level – most companies will lend up to half the value of a car.

The borrower then signs a bill of sale and hands over the logbook to the lender. The lender may register the bill of sale with the High Court, as it is court approval that enables the repossession of the car in the event of the borrower defaulting on payment. It makes sense to check at the time of making loan arrangements if the bill of sale is to be registered.

Most lenders will pay by cheque and expect repayment weekly over a period of 78 weeks, although it is possible to pay off a loan earlier if funds are available. When the debt has been discharged, the logbook is returned to the borrower.