What are Logbook Loans and How Do They Work?
Logbook loans are a kind of secured loan that use your vehicle as security. In other words, the lender technically owns your car until you pay back the loan. Although you can continue to use your vehicle as you would normally, this is only the case if you pay the loan according to the rules that are given to you. It’s important to remember that logbook loans are often trick and complicated, so you should avoid them whenever you can.
You can normally get logbook loans either on the high-street or on the internet. Usually, you can borrow any amount of money, up to £50,000 depending on how much the value of your car is. Some firms, however, will only be willing to let you borrow around half of your car’s complete value. When you get a logbook loan, you will be asked to hand over the registration document of your vehicle, or your logbook. These documents legally prove that you are the keeper of the vehicle. However, even if you don’t hand over these documents, you will still be giving up ownership of your car until you repay the loan.
Taking Out Logbook Loans in the UK
Logbook loans are exclusively only used within Wales, England, and Northern Ireland. You cannot get a logbook loan in Scotland. However, if you are offered a loan based on your car there, it will probably be a conditional sale or a hire-purchase loan. You will need to make sure you understand the details of this loan.
When you get a logbook loan, you will sign a credit agreement and you will also be given a bill of sale. This sale bill will show that the lender owns your vehicle temporarily, but that you can also continue to use the vehicle so long as you’re meeting the repayments as normal.
Most of the time, logbook loans will run for a maximum of around 78 weeks at a time. However, you are entitled according to the law to pay back the logbook loan early if you would like to do so and you can afford it. With certain agreements, you will only need to pay the interest on your logbook loan until the final month of the contract. However, at this stage of the final month you will have to pay back all the amount of the original money you borrowed.
The Problems with Logbook Loans
Usually, typical annual percentage rates for logbook loans, or APR rates are much higher than you would get from a standard loan. This means that logbook loans can be a very expensive form of credit. If that wasn’t problematic enough, as we mentioned above, a logbook loan is a kind of secure loan. This basically means that if you’re unable to keep up with the repayments that you owe to the loan company, you could lose your vehicle.
With logbook loans you also don’t get the same amount of customer protection as you might get with an agreement of hire purchase. You will also need to make sure that you are the legal owner of the vehicle, and that your vehicle is worth more than £500 if you want to borrow anything. There can’t be any outstanding finance on your car.
When Taking Out a Logbook Loan
When you take out a logbook loan it’s important to remember that the interest levels are very high, so it’s important to pay what you owe as quickly as possible. Additionally, some logbook loan providers will ask you to pay extra fees if you want to pay what you owe early. Logbook lenders can sometimes ask for weekly payments, and some won’t take any form of direct debit, which makes it harder for you to keep on top of the amount that you need to pay.
How much you will be able to borrow from a logbook lender will generally depend on the value of the car or vehicle that you are putting up as security. In very rare and specific circumstances, you will be able to get a logbook loan on a car that has finance on it, but you will need to be careful with this process as it can quickly lead to debts and financial problems.
If you cannot pay back the money that you owe on your logbook loan, your lender will have the right to turn to bailiffs who will take your vehicle from you. However, most of the time these lenders won’t sell your vehicle until you have not made several different repayments. According to the law, you will need to be given a notice first, so you should have some time to respond.
If you’re concerned that you’re going to lose your car to a logbook loan, you should use your notice as the time to seek out help.