The Pros and Cons of Logbook Loans

Logbook loans are a type of short term loans that are secured against your car. Literally speaking, your lender takes your vehicle’s logbook in possession while the loan is still in place. While you can continue driving your own vehicle, you cannot get the logbook back until the loan is paid back in full.

Logbook loans are becoming one of the easiest lending solutions nowadays. With the growing number of people with bad credit, it’s harder than ever to qualify for personal loans from banks and other lending institutions. Thankfully, logbook loan lenders specifically cater to the needs of borrowers with bad credit, particularly those with arrears, IVA’s, and those who have filed bankruptcy, whose applications for normal loans will be downright rejected.

Now let’s take a closer look at what these loans are all about, and the advantages and disadvantages of getting one yourself.


Larger Borrowing Limit

Because of the attached security on the loan, lenders are more willing to lend out a larger amount of money that is equal to about 50% to 70% of your vehicle’s current market value. This is very useful in situations where a large amount of money is needed.

No Credit Check

Logbook loans are specifically designed for borrowers with credit problems and couldn’t avail a cash loan from traditional sources such as banks or building societies. You will only be judged based on your capacity to pay and not on your credit rating.

Flexible Repayments

Unlike other loans with a fixed repayment period, with logbook loans, you decide how often and how much to pay. This gives you the flexibility to choose your own payment terms and manage your finances with ease.

Same Day Approval

Because logbook loans have no credit and other stringent checks involved, your money is usually released within the same day of application. If you need the money for emergencies, a logbook loan can give you a temporary cash flow fix.

While we have summed up the advantages of logbook loans above, we have listed down the cons of logbook loans below.


High Interest

There’s no denying that logbook loans have outrageously high interests, and are not for those who constantly find themselves in debt. It’s good to know however, that logbook loans are still cheaper than payday loans, and are much easier to repay.

Vehicle Becomes the Collateral

The biggest drawback of a logbook loan is that you’re basically putting your vehicle at risk. If you fail to pay the loan back, the lender can take your vehicle and sell it to cover your unpaid balance.

Can Affect Your Credit Rating

If you’re looking into a logbook loan, chances are you’ve had troubles with your repayments in the past and your credit rating tells all about it. Missing your logbook loan repayments can further put your credit score in danger, thus limiting your borrowing options in the future.

If you’re in a situation where money is always tight and the need for borrowing arises from time to time, perhaps it’s time to evaluate where you are financially. There’s nothing wrong with seeking advice from professionals. Non-profit sites like StepChange can help you fight this never-ending cycle of debt without charging you an arm and a leg.