A logbook loan can get you money quickly when you need it, but it is a serious commitment. It is secured on your vehicle, it runs for at least 18 months and it costs more than most mainstream borrowing. So before you apply anywhere, it is worth taking ten minutes to ask yourself a few honest questions.
Here are the ones we would want a friend to think about. If logbook loans are new to you, have a read of what a logbook loan is first.
What exactly is the money for?
Be specific. "Sorting a few things out" is hard to put a price on. "Replacing a boiler that has packed up" has a price you can get quotes for. Knowing the exact purpose helps you borrow the right amount rather than a rounder, bigger number.
Ask yourself too whether it is a need or a want, and whether it can wait. If you could save up for it in a few months, waiting would avoid the cost of borrowing altogether. Our underwriter will ask what the loan is for anyway, so it helps to be clear in your own mind.
Can you afford the repayments every single time?
Look at what is left after your bills each month, not at your salary. If you have not done this lately, our guide to the key numbers in your budget walks you through it.
Then picture the repayment going out on top of everything else for 18 months or more. Would you still manage in a month when the car needs tyres or the kids need new school shoes? If the honest answer is "only just", the options include borrowing less, choosing a longer term to bring the repayments down (though that means more interest overall), or waiting. You can try different amounts and terms on our loan calculator, which also shows the representative example.
Have you looked at other options?
A logbook loan is rarely the cheapest option, so before applying it is worth finding out:
- whether a credit union could lend to you
- whether your own bank would offer a personal loan
- whether the company you owe will agree a payment plan
- whether family could help, with a clear plan to pay them back
- whether you are getting all the benefits you are entitled to, using one of the free benefits calculators listed on GOV.UK
What would happen if your circumstances changed?
Over 18 to 60 months, a lot can happen. Jobs change, hours get cut, families grow. Think about how secure your income is and whether you have any savings to fall back on.
If something did go wrong, the most important thing is to tell your lender straight away. With us, getting in touch early gives us the best chance to help. Free, confidential advice is also there from StepChange, National Debtline and Citizens Advice. And if things go better than expected, you can settle early at any time with a rebate on interest.
Are you comfortable with the security?
With a logbook loan you sign a Bill of Sale, which makes the lender the legal owner of your vehicle until you have repaid. You keep the keys and drive as normal, but if you do not keep up the repayments, the vehicle can be repossessed.
So ask yourself how you would get to work without it, or manage the school run. If losing the car would cost you your job, the stakes are higher still, and you need to be very sure about the repayments.
If your answers point to yes
If you have a clear purpose, a budget with room to spare, no better alternative and a plan for the unexpected, a logbook loan may be an option worth considering, though only you can decide whether it suits your circumstances. With Logbook Money you can borrow £1,000 to £50,000, your interest is fixed when you sign, and a soft search gives you a personalised quote with no effect on your credit score. You also have 14 days after the agreement is made to change your mind.
If your answers point the other way, that is useful to know too. This article is general information, not financial advice. For free, impartial help with your own situation, a chat with MoneyHelper costs nothing and might turn up a better route.
Your car may be repossessed if you do not keep up repayments on a loan secured against it.
