Types of Debt
Logbook Loans Debt Help & Advice
What are logbook loans?
By definition, a logbook loan will work in a similar way to car finance, except that you will borrow the money against the value of the car itself.
Logbook loans (otherwise known as car title loans) are usually taken out over a period of up to 3 years and can range in value from £500 to £5,000, depending on the value of the car. You are required to hand over the registration or logbook documents when setting up the arrangement, meaning the company will then own the car until the loan is repaid.
Interest rates for logbook loans are on par with that of payday loans, making them very expensive to repay. If you become unable to keep up with the repayments, the lender can then take the car from you.
This type of loan is only available in England Wales and Northern Ireland. If you are offered a logbook loan in Scotland, it is more likely to be a hire purchase agreement or a conditional sale.
How do people fall into logbook loan debt?
People often turn to logbook loans when they are unable to get a loan from other lenders. This can sometimes be in order to help pay back other debts that they are struggling with or because they are in need of cash for an emergency.
Many companies will not conduct a credit check for a logbook loan, making it very attractive to people with a poor credit history or a low credit rating.
This is also a major reason why people taking on logbook loan debt so often fall into financially difficulty. This type of debt is most attractive to people with a poor credit score – the very same people most likely to default on repayments and end up with serious debt problems.
Logbook loans are also an extremely expensive way to borrow. With interest rates of up to 300% APR, on top of regular monthly payments, you’re often asked to repay more than double what you actually borrowed, making it easier for logbook lenders to default.
What happens if you can’t pay back your loan?
Because they’re a secured debt, secured against the vehicle you’re buying, the logbook loan lender will hold the vehicle’s bill of sale until you have paid off your debt in full.
If you fail to keep up with payments, the lender will follow a step-by-step process that culminates in repossession of the vehicle, and using your vehicle to recover the money you owe.
Default notice
While you shouldn’t face threat of repossession for missing one repayment towards your vehicle, multiple defaults will kickstart the process of repossession.
It’s part of their due process for the lender to send you a default notice first, letting you know that you’re officially in default and what will happen should you continue to miss payments.
The default notice will state that you have 14 days to respond by way of payment, or by reaching out to the lender to begin a dialogue. It’s important that you seek debt advice at this point, either from a debt management company or debt charity, or you face having your car taken away.
Lender takes ownership of your vehicle
In normal circumstances, a lender needs to obtain a court order to take possession of your assets. That’s not true in the case of a logbook loan.
The logbook loan company is the owner of the vehicle until you have reached the end of your payment term. This means they don’t have to use court action in order to repossess the vehicle – as long as they hold the bill of sale, they are the legal owners of the vehicle as per your logbook loan agreement.
Can the logbook loan company sell my car at auction?
Yes, your vehicle can be taken if you fail to make your loan payments. At that point the lender takes ownership. Using the the value of your vehicle in order to recoup your debt, logbook loans companies will usually sell your repossessed vehicle at auction.
In the event that the money raised from the sale of the vehicle is less than your total loan amount, you will be responsible for paying the remaining balance, and will be expected to repay that debt as soon as you can reasonably afford to.
By the same token, if the money raised from the sale of the vehicle is more than what you owed to the logbook loan company, the excess money will be sent to you. It’s important to know that cases like this are rare.
Is there a way I can protect my vehicle from a logbook lender?
If you default on a logbook loan debt there is very little you can do to protect your vehicle. In England, Wales, and Northern Ireland, logbook lenders don’t even have to obtain the court’s permission to repossess your car.
Because they technically own the vehicle, they can act as they see fit. The lender can come at any time, day or night, to take your car away, and they will usually add extra fees on top of your debt to make sure you cover the cost of the vehicle removal.
If you’re struggling with logbook loan debts and facing repossession, the most important thing you can do is seek debt advice to make sure you can come to sort of payment arrangement and protect your other assets.
Where can I get debt advice and more information on dealing with a log book loan?
Logbook loans are an extremely dangerous form of borrowing. They may allow people with poor credit to buy a car with a finance arrangement, but they’re also expensive, and come with a high risk of defaulting on payments.
If you’re struggling to repay your logbook loan and are worried about having your car towed away, Carrington Dean can help. We’ve helped over 35,000 people deal with their debt so far, and can offer you a range of debt solutions to help you protect yourself from logbook lenders.
Our advisers will be happy to take you through the options available to you, and help you choose the debt plan that’s the best fit for you situation. For free debt advice and expert guidance, talk to Carrington Dean today. Our phone number is 0800 043 1320.