If you’ve got a bad credit profile and you’re looking for a loan then chances are that during your search you’ve come across logbook loans. Logbook loans work on the basic idea that if you own a vehicle you can secure it against a loan. The reason they are called Logbook loans is that the logbook (your vehicle registration certificate, also known as your V5) is taken by the lender for duration of the loan term, temporarily resulting in the lender owning your vehicle.
What not to do
Logbook loans are designed as a solution for those with bad credit. If you have a perfect credit history then you are in the wrong place. You will be able to get much better rates by applying for either a bank or supermarket loan where you will have access to APR’s of less than 10%.
Pricing and things to watch out for
As Logbook loans are aimed at those with bad credit the rates are generally quite high,ranging from 178.2% APR to 498%. Loan terms are relatively short, ranging from 6 months to 3 years with loan amounts between £300 and £50,000. The value of the loan you’re able to get with a logbook lender will depend on the value of your car. In some cases outstanding finance on your car can be deducted from the overall value of the loan offered but this will depend on the value of your car.
Note that Logbook lenders take your V5 when you agree your loan. This makes them the registered keeper of your vehicle for the term of the loan and if you miss even a single payment, your car can be sold very quickly and without going through a court process. This puts logbook lenders into the lender of last resort category and it goes without saying that it’s absolutely imperative that you ensure you can make the repayments before committing to taking out a logbook loan.
Acceptance criteria
Logbook lenders do not discriminate based on your credit score, all they require is that you own a vehicle. If you’re considering a logbook loan and own a specialist vehicle it’s worth noting that each individual lender is different and will have varying restrictions to what vehicles they accept. Some lenders for example do not accept ‘prestige’ or ‘classic’ cars - bottom line, do your research and compare lenders before applying.
Final word
If you have a poor credit history and are looking for a personal loan then a Logbook loan is worth considering. Logbook loans do however come with a severe health warning. Whether or not you rely on your vehicle to get yourself to work or for the daily school run by committing to a logbook loan you’re putting your vehicle at risk. Therefore before applying for a logbook loan be sure you can safely meet the agreed repayments. If in any doubt, do not apply.
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