Can I get a secured loan against my car?

Written By: Hannah O'Neill
Published: November 21, 2023

In a word, yes, you can get a secured loan against your car, and these are typically known as logbook loans. However, at Believe Money, we don’t offer this type of loan. But don’t let that stop you from learning everything you need to know about logbook loans.

In this article, we’ll explore what logbook loans are, how they work, their benefits and risks, and why they might or might not be the right option for you. Stay informed and make the best financial decisions for your circumstances.

What is a Logbook Loan?

Logbook loans allow you to borrow money and use your car as an asset. They work similarly to traditional secured loans, where the lender uses a property as security. While logbook loans are a quick solution to getting your hands on some cash, they often come with strings attached. – including high interest rates. If you’re considering applying for a secured car loan, it’s best to weigh the pros and cons before deciding.

How do logbook loans work?

If you’re in England, Northern Ireland or Wales, you could get a logbook loan. However, they’re unavailable in Scotland. In order to qualify for a logbook loan, you have to be the vehicle’s owner, and your car must be free or almost free from finance. You must also be willing to let logbook lenders take temporary ownership of the vehicle. You can still use your car throughout the loan’s duration if you’re still making regular weekly or monthly instalments. Once you’ve paid off the loan, you’ll regain full ownership of the car. Of course, if you don’t make regular repayments, the lender can take it from you.

Can I get a secured loan against my car?

Yes, you can get a secured loan agreement against your car, but logbook loans often come with high interest rates. You’ll need to prove you’re the vehicle’s registered keeper by showing the lender the V5 logbook, as these loans are only available to vehicle owners.

What vehicles are accepted for a logbook loan?

Most lenders are happy to accept a range of vehicles depending on their value and condition. Some of the most popular include:

  • Cars
  • Vans
  • Motorbikes
  • Caravans and Motorhomes

Some lenders might be willing to accept boats, helicopters and light aircraft if they’re in storage and you’re not actively using them.

How much can I borrow with a logbook loan?

The amount you can borrow depends on the value and condition of your vehicle. However, the general loan amounts often equate to 50% – 70% of your vehicle’s value. Many logbook lenders let you borrow between £500 to £50,000, but borrowing a lot of money increases your monthly payments.

Documents required for a logbook loan

Along with the V5 logbook, the lender will ask you to sign their credit agreement, which locks you into the loan. The lender registers a bill of sale with the High Court, enabling them to take possession of your vehicle should you default on the loan. Some lenders might also ask for a spare key and proof that your car is up to date with tax payments, MOTs and insurance.

Can I get a logbook loan with bad credit?

One of the benefits of logbook loans is that you don’t necessarily need to score high on your credit check because the lender has security in the form of your vehicle. However, if your car isn’t worth much money, you might not get a loan.

How do I make payments on a logbook loan?

It depends on your lender, as some prefer monthly instalments through direct debit, while others will let you pay off your logbook loan by setting up a standing order or making cash or cheque payments. Asking your lender before signing the agreement ensures you know how to make your logbook loan repayments. Some providers might also let you pay the logbook loan early, but it depends on their terms and conditions. 

What happens if you can’t pay your logbook loan?

If you fail to make your loan repayments, the lender could send in the bailiffs and cease your vehicle. You’ll lose ownership of it, and – as with all loans – defaulting can negatively impact your credit score. That’s why it’s best to think about whether you really need the money and if there’s a better solution available.

Why doesn’t Believe Money offer secured car loan brokers?

Believe Money is a reputable loan broker dedicated to finding clients the right borrowing solution. As with payday loans, a logbook loan often comes with excessive interest rates that can quickly cause issues for borrowers. We see these loans as a last resort for numerous reasons. Before even thinking about applying for a secured car loan, it’s essential to understand the potential drawbacks.

High interest rates

Many people see these loans as a last resort when they might be unable to access other borrowing forms, but they’re not a fix-all solution. According to the Financial Conduct Authority, logbook loan providers often have APRs of around 400%, which is a shocking amount compared to other loans. In reality, borrowing even a tiny amount can result in severe financial worries and excessive monthly repayments.

Reputability issues

Loans secured against your car might seem like a good idea, but the Citizens Advice Bureau reports that many people get a logbook loan because they feel it’s their only option. According to research, only 40% of people with these loans are in employment. Many have other debts, and 37% also had a payday loan, leaving them in a spiral of high-interest debt. There are also concerns that lenders don’t perform proper affordability checks, which means reputable loan brokers don’t offer these solutions, as consumers have little protection.

You could lose your car

Research from the Consumer Credit Trade Association highlights that consumers don’t have much protection regarding logbook loans, so it’s important to remember they differ from car finance (CAB). If you can’t meet your monthly repayments, you’ll lose your car—but that’s not all. The lender will become the legal owner and sell the vehicle to recover their money, but it will also appear on your credit file, impacting future borrowing options.

The alternatives to logbook loans

With their many risks, it’s best to avoid logbook loans wherever possible. However, there are some alternatives that offer lower interest rates and more security. If you need to borrow money, considering these options first can help you avoid getting into serious debt.

Traditional secured loans

Getting a loan secured against your property gives you access to low interest rates and longer repayment durations. You need to be a homeowner and own equity, as the lender will offer an amount based on that equity – and not your current mortgage. However, failing to make the payments puts your home at risk, and some people might borrow more than they need. In general, secured loans offer more flexibility as you know exactly what you’ll repay each month.

Unsecured loans

Also known as a personal loan, unsecured borrowing is available for people who don’t own a property. Most lenders enable you to borrow between £1,000 and £25,000, and decent interest rates are available – depending on your income and credit score. If your credit history isn’t favourable, you might still be able to get an unsecured loan, but this often means higher interest rates and shorter repayment terms. However, personal loans can also help you consolidate your existing borrowing, enabling you to manage debts more efficiently.

Guarantor loans

If you have bad credit and can’t access traditional loans, a family member or friend can become responsible for the loan on your behalf. Lenders appreciate security, and guarantor loans mean someone else will make repayments if you default on the agreement. Some people are unwilling to become guarantors due to the associated risks involved, but you can potentially access a higher loan amount and get better terms, as long as your guarantor has a stable income and good credit score.

Credit cards

Credit cards can be a lifeline in emergencies, enabling you to pay for items outright. Some people use 0% credit cards, but it’s easy to overspend on them and get into more debt. Clearing your balance before the 0% duration ends prevents you from paying interest, but people with a bad credit score are usually ineligible for these cards.

Using an overdraft or savings

If you have a bank overdraft or savings available, you can use them to access money. In many cases, dipping into your savings is best when you don’t have a stable income or your credit score is low because it saves on interest rates. Arranged overdrafts can also help cover vital expenses, but you will pay interest if you exceed the agreed amount. Also, getting trapped in an overdraft is easy, meaning your balance will constantly be negative.

Advances and budgeting loans

People receiving Universal Credit, ESA, Jobseekers and Pension Credits might be entitled to financial support. Universal Credit advances enable you to access money while waiting for your first payment to come through, but your weekly payments will decrease until you pay the advance off. Budgeting loans are available, depending on availability and whether the DWP will offer you one.

Get secured and unsecured loans from Believe Money

If you’re looking for a loan, Believe Money can help. Our brokers have access to a specialist network of lenders who judge each application individually instead of the checkbox criteria that mainstream loan providers use. Once you have your consultation, we’ll advise you on the types of loans you could be eligible for and match you with specialist lenders to find the best deal. We don’t offer logbook loans due to their high interest rates but work with people from all backgrounds. Whether you’re unemployed, have a bad credit score or are struggling to manage your finances, we go out of our way to find a suitable deal. With zero upfront fees and support throughout the application, Believe Money can help you improve your financial future. Please feel free to get your free consultation today.

About the Author

Hannah O'Neill

Hannah O'Neill

Hannah O'Neill is a leading financial expert with over 10 years of experience in credit and loans. She is helping people achieve their financial goals based in the United Kingdom. She has been featured in numerous media outlets. Her articles offer practical advice on how to improve your credit score, get the best possible loan rates, and manage your debt wisely.

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