How Does A Logbook Loan Work?
UK logbook loans are a type of secured loan which use your car as collateral. Essentially instead of trusting your credit worthiness (your word) the lender has a right to your car if you default. So of course there are a few things you need to do in order to get the loan.
Age and Value of Your Car
Your car can not be older than 8 years for almost all lenders. This is because cars quickly lose value beyond this age increasing the likelihood that you’ll just hand your keys over instead of paying them back. Often the logbook lender will want to see maintenance records and have a general technical exam on the car before loaning to you to ensure the car is worth what it should be.
Pay all Notes on the Car
The honest logbook lenders will want to make sure no one else has a claim to your car if you default. So, all other notes need to be paid for before they will lend to you. All taxes also need to be paid on the car before they will lend. The government will not hesitate to take a car in payment leaving the loans for logbook lender holding the bag.
Active Insurance
Insurance for the vehicle must also be paid. If you are month to month some lenders may require you purchase a longer term contract. They will also want a copy of your insurance records to make sure you maintain them. If you allow your insurance to lapse they may call your loan.
Proof of Employment
The last part you need is proof that you can make the loan payments. Some lenders may want to see a work history, but most just want to see that you are presently employed.
After that the loan works as a regular loan where you make your monthly payments. The only difference is you may be asked to continue to prove you are employed, the car is in good repair, and your taxes and insurance are up to date.