Tread carefully with logbook loans

Logbook loans are billed as fast, effective ways to get a loan without putting your house at risk and are particularly aimed at people with poor credit ratings.

A logbook loan is effectively a secured loan but typically you can get much faster access to cash. Borrowers don't have to put their home up as collateral, but they do have to put their car up as security against the money they borrow in case they default on payments.

How do Logbook loans work?

Logbook loans do exactly as they say on the tin. You take out a loan with a specialist finance company and secure that loan against the logbook of your car. Most people know the term logbook as the registration form V5, which is used most often as part of a private sale of a vehicle.

The logbook includes details of the vehicle registration, VIN number and details of the registered keeper - ie. you.

If you take out a logbook loan, therefore, you must hand over the logbook to the lender until you have repaid all the money you borrowed. If you default on payments, the lender will repossess your car and sell it on.

One of the major benefits of logbook loans is that you can often get access to cash on the same day that you submit your application.

Logbook loans should not be considered a viable option for most of us. They are typically very expensive and many people will find cheaper ways to borrow funds.

This is why logbook loans tend to appeal to people with bad credit records. Because you are offering your car as collateral, lenders feel comfortable taking on customers with very bad credit histories - there are no credit checks at all with logbook loans and lenders won't mind if you have CCJs to your name. However your car usually has to be relatively new and clear of any finance agreements plus fully paid up with insurance and tax.

Logbook loans should only be seen as an option of last resort. They are VERY expensive. If you were to borrow as little as £1,500 with Logbook Loans over 6.5 years, you'll end up repaying over 2.5 times what you borrowed at £4,180.80. That's an equivalent APR of 437.4%!

Article 2

For those of you who own a vehicle you'll be aware of the V5 registration document, which has now been changed to a V5C (certificate). The V5 is also known as the vehicle logbook. It contains information regarding the cars make, model, engine, number plate, colour etc. This certificate can now be used in to apply for a loan, known as a logbook loan.

Essentially a logbook loan is a secured personal loan, with the car as collateral. Any UK resident who has a logbook registered in their name is eligible for a logbook loan. Although the lender keeps the logbook when the money is borrowed, the borrower can feel free to drive his/her car without any boundaries from the lender.

The amount borrowed can range from £500 to £50,000 depending on the value of your car and your current financial status.

The following criteria are to be adhered to, in order to become eligible for a logbook loan:

To be eligible for a logbook loan, the logbook should be in the name of the borrower and match up to the name of the car.

8 years is the maximum age of a car before the loan application will be accepted.

The loan applicant must be in full time employment and should have been in employment for at least 3 months.

The car should be owned fully be the applicant and not on finance.

The car should not have any due payments otherwise the application will be denied instantly.

The vehicle must be fully insured, road legal and taxed.

With every loan application, credit scoring must take place in order to check if you are a valid candidate for a loan. However with a logbook loan credit scoring need not apply.

Logbook loans can be obtained at most financial institution such as banks and building societies. The fastest way to apply for a loan is online. Online lenders provide the advantages of speed and ease when applying. A borrower can view hundreds of loan lenders from the comfort of their own chair and apply within minutes.