What is a Logbook loan?
Before we understand what a logbook loan is, it is important to first define what a logbook is. A logbook is a document that records key information about the vehicle and its owner also known as vehicle registration form. If the owner sells the car and therefore transfers it to another person, details of the new owner are entered in the second page of the log book and posted to the DVLA to inform them of the new changes.
A logbook loan is a loan secured against the car whereby the car acts as the security. When applying for the loan, the lending institution will ask for the original logbook which will remain in its possession until the full payment of the loan is received. Once you have cleared the loan amount the institution will return the logbook back to you and that is why it’s called a logbook loan. You however continue to drive the vehicle during the time of the loan.
In Scotland the paperwork behind the logbook loan differs in that one needs to sign an agreement transferring ownership of the vehicle to the lender. The lender then hires the vehicle back to you on hire purchase terms and you continue using the vehicle throughout the duration of the agreement as long as you meet your payments.
In order to secure a logbook loan, you need to be a resident of the UK and be 18 years and over.
Taking a Logbook loan in UK
If you reside in Wales, England or Northern Ireland, then you’ll have to sign a credit agreement as well as a bill of sale. This hands temporary ownership of the vehicle to the lender during the duration of the loan. In case of a default in payment the lender can repossess the vehicle but only if the bill of sale is registered with the High Court. If not, then the lender needs to get a court approval to repossess your car.
What should you consider before taking a LogBook Loan?
The Annual Percentage Rate can end up being quite high so it’s smart to pay it off as fast as possible.
Consider taking a statement of account to keep in track of how much you have paid within a particular time period. Some lenders will require weekly payments and if they do not take direct debit, it could be difficult to keep track of how much you owe.
The amount you can borrow will depend on the value of your vehicle so it is wise to get an independent valuation. This is a requirement of reputable lenders.