What is a Logbook Loan and How do They Work

The logbook loan is a derivation of the colloquial term “logbook”, officially called the V5C vehicle registration certificate. This document tracks the registered user of the vehicle (as opposed to the owner). It contains information such as changes in ownership and vehicle modifications.

A log book loan is a kind of financial solution wherein money borrowed is secured against your vehicle. The amount you can borrow varies from lender to lender and the value of your car, motorbike, caravan or any other suitable vehicle.

Because the logbook is treated as a proof of ownership, the lender holds on to it when you take out a logbook loan. You are free to keep the vehicle and drive it during the duration of loan term.

Benefits of Logbook Loans

Logbook loans can be the saving grace for individuals with a less than perfect credit history. Unlike traditional financial institutions, the criteria for being eligible for a loan are less stringent. Because you have put up your vehicle as collateral, it is the vehicle’s market value that serves as basis of credit.

Banks also take into account the current state of the economy, which would make them reluctant to approve loans during times of difficulty. Log book loans only account for your ability to pay back what’s owed. With the
vehicle as a safety net, the lender is also able to offer more substantial amounts to the loan applicant. Unsecured lending offers little to no such reassurances.

Another reason why the log book loan may be preferable is that you can take out a loan for any purpose. Applicants are not just confined to housing loans or car loans. Purposes such as home improvements or new business investments can be achieved without having to get approved.

For those needing quick money, logbook loans provide the necessary funds in as little as a day. Bank loans typically take at least three days to go through the ropes of loan approval. Then when approved money can still take it’s time to actually finding it’s way to you.

Caveats of Logbook Loans

While credit history is almost a negligible factor when applying for a logbook loan, a continued source of revenue is a must. The loan provider investigates if you have the ability to pay back the loaned amount – which might come with a hefty interest.

Logbook loans are known to attract high interest rates. The typical annual percentage rate for a loan is 437.4%. As such, it should not be used as a long-term solution for financial problems and should be paid off as quickly as possible.

In addition, the vehicle to be put up as collateral must be in decent condition. Most loan providers would require for the vehicle to be not more than 10 years old. It must be relatively free of finance (or have very little balance left to be paid).

The log book loan has its own pros and cons. As long as loan repayment is not an issue, the risks are almost negligible.