When you borrow against your car, one of the first questions is usually "how much can I get?" The answer depends on two things: what your vehicle is worth, and what you can comfortably afford to repay. The first part is where loan to value, or LTV, comes in.
It sounds technical, but the idea is simple. Here is what LTV means, how it is worked out, and why it matters to you as well as to us.
What does loan to value mean?
Loan to value is the size of a loan compared with the value of the thing it is secured on, shown as a percentage. You might have come across it with mortgages, where a 90% mortgage means you are borrowing 90% of the home's value. The same idea applies to a logbook loan, except the security is your car, van or motorbike.
The sum is:
Loan amount ÷ vehicle value × 100 = LTV %
So if your car is valued at £10,000 and you borrow £4,000, the loan to value is 40%.
How is your vehicle valued?
Lenders base the valuation on what the vehicle would realistically be worth if it had to be sold, not on what a dealer might ask for it on the forecourt. That figure is often lower than people expect. Things that affect it include:
- Make, model and engine size.
- Age and mileage.
- Condition, inside and out, including any damage.
- Service history and MOT record.
- How much demand there is for that kind of vehicle.
Not every vehicle is suitable, so check our list of vehicles we accept. You also need to own the vehicle, with no outstanding finance on it.
Some simple examples
These figures are only to show how the maths works. They are not offers, and they do not tell you what any lender would lend.
- A small hatchback valued at £5,000. Borrowing £2,000 would be an LTV of 40%. Borrowing £3,500 would be 70%.
- A family estate valued at £12,000. Borrowing £3,000 would be 25%.
- A van valued at £20,000. Borrowing £10,000 would be 50%.
The lower the LTV, the bigger the gap between what you owe and what the vehicle is worth. Remember that your car will keep losing value while you repay, so that gap matters over the whole term, not just on day one.
Why loan to value matters
For a lender, LTV is about managing risk. Vehicles lose value over time, so lending only part of what a car is worth leaves room for that drop. It also means that if a loan cannot be repaid, the vehicle should cover what is owed.
For you, it matters too. A lower LTV means you are borrowing less against your car, which keeps your repayments and the total cost of the loan down. Just because a vehicle could support a larger loan does not mean you should take one. Borrow only what you need.
Value is only half the story
Your car's value sets the ceiling, but it does not decide the amount on its own. Logbook Money looks at affordability as well as the vehicle. An underwriter reviews your bank statements and calls you to check the repayments will fit your budget. If your vehicle could support £6,000 but your budget comfortably covers repayments on £3,000, the loan would be based on the smaller amount.
We lend from £1,000 to £50,000, so a vehicle with a very low value may not be suitable at all. You can read more about the whole process in our article on what we check when you apply, or get a feel for repayments and see the representative example on our logbook loan calculator.
A logbook loan is an expensive way to borrow, and you could lose your vehicle if you do not keep up repayments. This article is general information, not financial advice. If you are thinking of borrowing to pay off other debts, talk to StepChange or MoneyHelper first.
Your car may be repossessed if you do not keep up repayments on a loan secured against it.
