Answers · UK 2025/26

What are the risks of a logbook loan?

A logbook loan is a high-cost loan secured against your vehicle, where you sign over ownership via a 'bill of sale' while keeping and using the car, and the lender can repossess and sell it without a court order if you default. Logbook loans often carry very high APRs (frequently 400%+), and because ownership legally transfers to the lender, you have far weaker protection than with a standard hire purchase agreement.

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Logbook loans are a niche but historically high-risk form of secured lending, and understanding how they differ from ordinary car finance is important before considering one. **How a logbook loan works** You borrow money using your car (which you must already own outright, with no existing finance) as security. Legally, this is done through a 'bill of sale', under which ownership of the vehicle transfers to the lender for the duration of the loan, even though you continue to keep and drive the car day-to-day. The V5C logbook document that gives the loan its name is used as part of registering this arrangement, though the bill of sale itself is the key legal document, registered at the High Court. **Very high cost** Logbook loans are typically among the most expensive forms of mainstream consumer credit available, with APRs commonly quoted well above 400% in some cases -- far higher than guarantor loans, credit cards, or even most payday loans, reflecting both the high risk lenders take on and looser competitive pressure in this niche market. **Repossession without a court order** Because the lender legally owns the car under the bill of sale, if you fall behind on repayments they can, in many circumstances, repossess and sell the vehicle without needing to go to court first -- unlike a standard secured loan or mortgage on a home, where repossession normally requires a court order. This is one of the most significant practical risks, as you could lose your car (and any equity in it) quickly following a default, potentially leaving you unable to get to work. **What happens to any surplus** If the lender repossesses and sells your car for more than the outstanding debt, you are entitled to the surplus, but in practice recovering this and getting a fair valuation can be difficult, and if the sale raises less than you owe, you may still be pursued for the shortfall. **FCA regulation and protections** Logbook loans are regulated by the FCA, meaning lenders must carry out affordability checks and follow rules on fair treatment of customers in financial difficulty, and firms must be authorised to offer this type of credit. However, this regulation does not remove the fundamentally higher risk profile compared with unsecured borrowing. **Better alternatives** Given the cost and repossession risk, a logbook loan should generally be considered a last resort -- a credit union loan, an authorised overdraft, a 0% purchase credit card (if eligible), or negotiating a payment plan with an existing creditor are usually far cheaper and lower-risk ways to access short-term credit. **Practical tip** If you are already considering a logbook loan, check whether the lender is FCA-authorised (searchable on the FCA register), read the bill of sale terms carefully, and get free debt advice from a charity such as StepChange or National Debtline first, since logbook loan debt can spiral quickly given the high interest rates involved.