A loan against your car is regarded as a high-risk finance option,
because of the very high-interest rates charged by such lenders. Interest rates can vary
between 100% and 400% APR, rates that would even make credit card companies blush.
They are aimed at consumers who have low credit scores or no
credit score and therefore, cannot secure finance from the high street banks or other mainstream
If you fail to keep up the loan repayments the logbook loan
have the right to seize your motor and sell it to recoup the
outstanding amount owed.
The loan company requires the customer to sign an agreement that gives them the right to repossess
the car without having to get a court order and resell it.
Most borrowers are not fully aware of the implications of signing such agreements. Also, there is
very little consumer protection for the borrower.
It is also worth noting that if the sale of the vehicle does not
cover the outstanding loan, the borrower is still liable for the balance.
Late or missed payments may incur a charge for chasing letters and
Some Logbook loan lenders do not do proper credit checks on the
borrower as the loan is secured loan against your car, so they have very little risk. Most
also fail to do proper affordability checks to ensure the customer can make the
The net result of all this is that many fail to make the payments
and fall even deeper in debt in addition to losing their car. This can damage your credit score
So it's advisable to consider all other options before you resort
to this type of financing.
Hopefully, shortly all such lenders will have to be fully
authorised by the FCA. This will provide some degree of protection for consumers.