Log Book Loans
Log book loans are a type of secured loan. These are secured against your vehicle and mean the loan company will own your vehicle until the loan is repaid.
Having a log book loan does not mean you have to stop using your vehicle, however, if you fail to make the repayments the loan company may repossess your vehicle.
How do log book loans work?
Like most loans now, you can apply online or in the high street. You can usually borrow up to the value of your vehicle, however, you will need to review the terms and conditions of the loan company to find out the finer details.
You will need to be the legal owner of the vehicle and provide the log book or vehicle registration documents to the loan company.
It is very important to understand this means you are handing over legal ownership of the vehicle to the loan company.
Can I get a log book loan?
Log book loans are available in England, Wales and Northern Ireland. Log book loans are not usually available in Scotland (more information can be found below).
Usually, companies stipulate you need to be aged 18 or over, be the legal owner of the vehicle and can afford the repayments.
According to Money Advice Group, you may still qualify for a log book loan if you still have finance running on your vehicle. You will need to get permission from your existing finance provider first. Log book loan providers usually only provide a loan if there is a small amount of finance left.
You will need to discuss with the loan company what their own criteria is.
What should I know before?
When taking out a log book loan you need to bear in mind the APR (Annual Percentage Rate) can be quite high.
According to the Money Advice Service a log book loan, APR is usually higher than 400%.
With a log book loan, how much you can borrow is determined by the value of your vehicle. ALWAYS get your vehicle independently valued before shopping around for a log book loan.
What happens to my vehicle if I don’t keep up repayments?
If you fail to make the agreed repayments the loan company has the right to use bailiffs to seize your vehicle. The lender will need to apply for this through the courts.
If you continue to not pay the loan the lender has the right to sell your vehicle to recover the money owed.
What happens if my vehicle is repossessed?
If you have failed to keep up repayments and your vehicle is repossessed, you will also be presented with a Bill of Sale*. This is a legal document transferring ownership of the vehicle to the loan company.
As the ownership of the vehicle is transferred to the loan company you are no longer the legal owner. This means you are unable to sell it until the final payments have been made.
Your vehicle will then be sold and if it is sold for less than the outstanding loan amount, the loan company can then take you to court to recover the shortfall.
*A Bill of Sale is not valid under Scottish law and so log book loan companies do not have the same rights to repossess and so a log book loan is very rare in Scotland.
Is there a log book loan already against my vehicle?
All log book loans need to be registered with the national HPI index. This database is available for anyone to check and it is always recommended you do this before purchasing any vehicle.
A car dealership should always check the HPI database before buying a vehicle.
If you are unfortunate enough to purchase a vehicle that has an outstanding log book loan it means you are not the legal owner.
The log book loan company may take action against the seller, but more importantly, they are within their rights to repossess it from the new owner without the need to go to court.
If this happens to you there are legal steps you can take against the person who sold you the car. Please visit the Log Book Loans info page on the Stepchange website for more information.
Is a log book loan different to a QuidMarket loan?
Yes, very different. Firstly, a log book loan is a “secured loan”. This means the loan is secured against an asset, in this case, your vehicle.
A QuidMarket Loan is not secured and acceptance is based on affordability checks (among other things).
Secondly, with a log book loan you will also receive a legal document transferring ownership to the loan company.
This document, known as a Bill of Sale, needs to be registered with the high court in order for it to be recognised.
This means if you fail to repay, the loan company have the legal right to repossess your vehicle.
Also, due to the value, security and duration of a log book loan (on average £1,000 – £5,000 over 1 – 3 years), the Financial Conduct Authority do not class this type of credit as HCSTC.
A QuidMarket loan can be from £300 – £1,500 from 3 – 6 months – use the calculator to work out how the loan value and duration can affect your repayments.
Warning: Late repayment can cause you, serious money problems. For help, visit: moneyadviceservice.org.uk