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A guide to logbook loans

A logbook loan is a type of loan that’s secured against your car. However, V5 loans can be a risky and expensive way to borrow money. They’re best avoided if possible.

Here’s what you need to know about logbook loans.

A logbook loan is a type of loan that’s secured against your car. However, V5 loans can be a risky and expensive way to borrow money. They’re best avoided if possible.

Here’s what you need to know about logbook loans.

Written by
Sajni Shah
Consumer expert on money and utilities
Last Updated
22 AUGUST 2023
6 min read
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What is a logbook loan?

A logbook loan, also known as a V5 loan, is a type of secured loan. It allows you to borrow money using your car as security.

When you take out a logbook loan, the lender takes over ownership of your car until the loan’s paid off. You’ll still be able to use your car, as long as you meet the loan repayments. If you can’t make the repayments and don’t pay back the full amount, you could end up losing your car.

You can only get a logbook loan in England, Wales and Northern Ireland. They’re not available in Scotland.

The Financial Ombudsman Service receives lots of complaints about logbook loans. These are mainly about loan companies not explaining their terms clearly or not carrying out proper checks to see if customers can afford the repayments.

Citizens Advice advises against taking out a logbook loan, warning that this type of loan can drive people further into debt.

If you do decide to take out a logbook loan, only choose a lender that is authorised and regulated by the Financial Conduct Authority (FCA).

You can’t compare logbook loans with Compare the Market.

How do logbook loans work?

You can find logbook loans online or on the high street. This is the process you should expect when taking out a logbook loan:

1. Determine how much you can borrow

The amount of money you can borrow depends on the value of your car and usually ranges between £500 to £50,000. But some companies will only lend you up to half of what your car is worth.

2. Have your documentation ready

In most cases when you take out a logbook loan, you’ll be asked to hand over your V5C logbook to prove you’re the registered keeper of the car. You’ll also need to show that you’re insured to drive it.

3. Sign the loan agreement

There are two agreements that you’ll usually need to sign for a logbook loan:

  • A credit agreement – includes details about the loan, how much you’re borrowing and how the money will be paid back.
  • A bill of sale agreement – this means the lender is now the legal owner of your car until you’ve paid back the full amount of the loan.

4. Receive the money

Once the application is complete, the money will be sent by electronic bank transfer into your account – usually on the same day.

A logbook loan is a secured loan – your car could be repossessed if you can’t keep up with repayments on your loan.

Am I eligible for a logbook loan?

To qualify for a logbook loan, you’ll typically need to:

  • Be 18 years old or over
  • Live in England, Wales or Northern Ireland
  • Own your car and be named as the registered keeper on the V5C logbook
  • Not be in a finance agreement or be towards the end of a finance agreement on your car
  • Have enough value in the car to cover the amount you want to borrow
  • Have valid MOT, tax and car insurance.

How to pay back a logbook loan 

When you take out a logbook loan, you’ll need to agree a repayment plan with your lender. You’ll need to think about:

  • How will you pay it back?

    Some lenders will allow you to repay your balance in monthly or even weekly instalments. Others will ask for the full loan amount at the end of the term, and you’ll pay off the monthly interest over the loan term.

    Have a think about what’s best for you and find a lender that suits that.
  • The loan term

    How long are you going to take the loan out for? Terms from anywhere between one and five years are usually available. 

    But don’t just stretch out the loan as long as you can. If you can afford to repay it sooner, you’ll avoid racking up further interest. 
  • Don’t miss your repayments
    Missing your monthly repayments will potentially cost you your car as it’s used to secure the loan in the first place. You could also face penalty charges and it could damage your credit score.

    If you keep up with your repayments and pay off the balance by the end of the loan term, you could improve your credit score.

How much does a logbook loan cost?

A logbook loan can be a very expensive way to borrow money. Typical average annual percentage rates, or APR, can be 400% or more. For example:

If you borrow £1,500 over 78 weeks with weekly repayments of £55, the full cost of the loan would be £4,290. So, in order to borrow £1,500, you’d be paying £2,790 in interest.

You also need to factor in any additional fees that will add to the total cost of the loan. For example, some lenders charge up to 4% of the loan if you want your money in cash instead of a bank transfer.

Are there any advantages to a logbook loan?

A logbook loan can have some benefits:

  • Quick access to money – in most cases you’ll receive your money on the same day, and sometimes within an hour.
  • No early repayment charge – unlike many standard loans, most logbook loans let you pay off your loan early without penalty.
  • You might be able to borrow more – the loan amount is based on the value of your car, so if you have an expensive vehicle, you might be able to secure a larger loan. 
  • You might be able to get a loan with bad credit – logbook loan companies may consider applications from people with poor credit who aren’t able to get a loan from mainstream lenders.

What are the disadvantages of a logbook loan?

A logbook loan could have potentially serious downsides:

  • You could lose your car – if you can’t keep up with the repayments, you risk losing your car.
  • Interest can be sky-high – interest rates are typically far higher than an unsecured personal loan from mainstream lenders.
  • No direct debit option – some lenders don’t take direct debits. This can be inconvenient, especially if you’re on a weekly repayment plan. 
  • You could struggle with repayments – if you’re struggling to pay back what you owe, you could end up in serious debt.
  • Less financial protection – you won’t have the same consumer protection as other types of loan.

How does a logbook loan impact your credit score? 

As with any type of credit, a logbook loan can affect your credit score.

If you keep up with your repayments, on time and in full, then you should see your credit score improve over time. This is because you’re proving that you’re a responsible borrower.

If you miss your monthly payments or can’t afford to repay what you owe, it will be recorded on your credit report. This will likely have a negative effect on your credit score.

Can you get a logbook loan with no credit check?

Unlike most other types of loan, a logbook loan is check-free. If you apply for one, a lender won’t run a credit check on you.

This means your logbook loan application won’t leave a mark on your credit file and it won’t be visible to other lenders.

Can you get a logbook loan with bad credit? 

Yes, it’s possible to get a logbook loan with bad credit. This is because guaranteed logbook loans don’t require credit checks as part of your loan application.

If you have a bad credit history, a logbook loan can be a useful way to borrow because your car acts as the collateral that the loan is secured against.

A word of caution though. If you have bad credit because you’ve struggled to manage your finances, a logbook loan might not be the best solution for you. If your credit score is already low, the last thing you want is to get into even more debt due to crippling interest rates.

If you can take the time to build up your credit score, you might have access to cheaper loans that are more affordable than a logbook loan.

Are there alternative ways to borrow money?

If you’re having cash-flow problems, a logbook loan can seem like a quick-fix solution. In fact, many people who take out logbook loans already have debt problems.

If you have multiple debts, you might want to consider alternative ways to pay them off, which may allow you to spread out your repayments over a longer period.

Alternatives could be:

Debt consolidation loan

This lets you turn multiple debts into one convenient payment. It could be a way to manage your debts more easily and reduce the amount of interest you’re paying on any outstanding debts.

Just be aware that by extending the length or term of the debt, you could be paying interest for longer. Early repayment charges may also apply.

Guarantor loan 

This is a type of unsecured loan and an option for those with bad credit. Instead of using your car or home as security for the loan, a friend or relative with a good credit rating guarantees to pay back what you owe if you can’t make the payments.

0% balance transfer credit card 

You could pay off the outstanding balance on other credit or store cards by moving your debt to a 0% balance transfer card. Although there’s usually a transfer fee to pay, you won’t be charged interest for a set period.

Budgeting loan

While you can apply for a logbook loan on benefits, you might want to check your eligibility for an interest-free Budgeting Loan from the government’s Social Fund.

This can be far cheaper than paying high interest charges, especially if you only need to borrow a small amount of money.

Compare the Market Limited acts as a credit broker, not a lender. To apply, you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.

If you’re struggling with debt

If you’re looking to take out a logbook loan to help pay off other debts, it might be better to talk to a debt expert about your financial problems.

You can get free debt advice and more information about your options from Money Helper, formerly the Money Advice Service.

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Frequently asked question

Can I use a motorbike for a logbook loan?

Yes, as long as you have full ownership of the vehicle, you can secure a logbook loan against a motorbike, van, caravan – or even a boat.

Can you get a logbook loan with an older car?

Unless it’s a rare or classic car, most lenders won’t accept vehicles over 10 years old. This is because logbook loans are secured against a car’s value. Typically, the older your car gets, the less it will be worth.

Can you get logbook loans on financed cars?

In most cases, you can only take out logbook loans against vehicles that have no outstanding finance on them.

Some lenders might consider your application if your car finance agreement is coming to an end and the remaining amount is low. However, you must get permission from your existing lender first.

Why can’t you get a logbook loan in Scotland?

Logbook loans aren’t available in Scotland because bill of sale agreements are not legally binding there.

However, you can get a hire purchase agreement (HP) or conditional sale, which are sometimes called logbook loans in Scotland. The benefit of HP is that it’s a regulated financial product, so you’ll be protected under the Consumer Credit Act.

Sajni Shah - Consumer expert on utilities and money

Sajni is passionate about building products, allowing Compare the Market to help you make great financial decisions. She keeps track of the latest trends and evolving markets to find new ways to help you save money.

Learn more about Sajni

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