Logbook Loans

Logbook Loans

car title loan
A logbook loan is a type of lending mechanism that allows an individual to use his or her vehicle's title as collateral. Most are short-term in nature and carry notably high interest rates. As opposed to a traditional loan, the lender will normally disregard the borrower's credit history and instead focus on the value of the car, this makes logbook loans attractive for those with bad credit history. Should the owner fail to make payments and eventually default, the title will thereafter be transferred to the lender and the car will be repossessed. Unlike car title loans, the USA equivalent of UK logbook loans, the lender can repossess the car without a court order. Approval normally takes only a matter of minutes and average amounts provided to the borrower are generally no more than one thousand pounds.

So, some of the key characteristics of this type of car loan include:
  • Short-term repayment periods and high interest rates.
  • No check on one's credit history
  • The title used as collateral in the case of a default.
  • In the UK, lender can repossess car without a court order.
  • Loan amounts generally less than one thousand pounds.

The Potential Pitfalls of a Logbook Loan

This type of financial instrument has received a fair share of bad publicity; generally due to the prohibitively high amounts of interest paid. As opposed to paying moderate interest when financing a car, a logbook loa may charge hundreds of percent interest on a balance. Thus, although this may provide a short-term liquid solution, the interest accrued may often times defeat the purpose of the initial loan itself. Therefore, it is essential to utilize a loan calculator to determine the overall sum that will eventually be paid back. This can avoid further financial troubles.

Another important consideration when applying for such a loan is the fact that the agency will only be interested in acquiring the title of a newer vehicle. An older model car will not provide the financial remuneration necessary should the borrower default. The lender will normally determine the value of the car and only allow a loan that does not exceed half of this figure.

This mechanism is also known as a payday loan. This is due to the fact that repayment is not directly linked to the borrower's pay period. However, the time periods in which logbook loans must be repaid may preclude such apparent financial freedom. Some lenders will ask for the total amount paid in full in a month or less. Therefore, it is essential to realistically determine whether such a time frame is feasible.

A final potential pitfall is the simple concept of risk versus reward. An online loan company may tout the countless reasons why car loans can help provide much-needed liquidity, but this must be counterbalanced against the possibility of losing a vehicle. Should this scenario take place, these instruments can prove more crippling than helpful in offering financial freedom.


Summarily, some of the negative connotations with such car loans are:
  • Very high interest rates.
  • The inability to offer an older vehicle as collateral.
  • Stiff and potentially inflexible repayment periods.
  • The risk of losing a vehicle.