Logbook loans are subprime specialised secured contracts made mostly on cars, although there is often coverage for bikes, caravans, vans and other vehicles. As well as a standard credit agreement there is a Bill of Sale processed that transfers ownership across the period that the money is borrowed. The lender keeps hold of the V5C registration document (previously V5) across this term. The Bill of Sales arranged are valid in England, Northern Ireland and Wales. They aren’t valid in Scotland where hire purchase agreements are instead used. The main criticism with this product type from debt charities is the sky high interest rates, as well as the little protection handed to customers who are at risk of repossession.
What makes this sector attractive in contrast is high approval rates with coverage open to those in self-employment or with very poor credit resulting from CCJs, defaults, late payments etc. The V5C security on a qualifying motor is good enough on its own, assuming that affordability can be demonstrated. A car must be free or nearly clear of finance, as well as being fully insured, MOT’d and taxed. Some firms require newer cars, whilst some impose no limits. A common trait spotted when viewing sites in this niche is the very high potential loan sums pitched of say £50,000. However, the lender only grants access to between 50% and 70% of the vehicle’s current trade value.