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Logbook loans - Personal loans now

Discover the truth about logbook loans and the battle to regulate them.

Learning Highlights
  • How do logbook loans work?
  • Why do many say they’re worse than payday loans?
  • Logbook loans for bad credit
  • Can I really lose my car?
  • The CAB’s campaign to regulate logbook loans
  • The future of logbook loans

Log Book Loan

There are people who find it hard to borrow money from quick personal loans and the other regular sources of credit, and it is these types of people who are usually tempted by logbook loans. But what exactly are these?

What Is A Logbook Loan?

A logbook loan means that you borrow money against the value of your car. You can typically borrow up to 50% of the trade value of the car. To qualify for a logbook loan, your vehicle must be less than 10 years old. An applicant will surrender the logbook of a car to the loans company. This means giving up the ownership title of the car in return for a short term loan. The minimum term agreed can be for as little as 6 months. Logbook loan terms can run for up to 36 months. In addition to the normal credit loan agreement, you must sign a ‘bill of sale’ which effectively transfers the ownership of the car to the lender.

The company providing the loan takes ownership of the vehicle and ‘lends’ it back to you while you pay off the debt. Once you claim the debt, you reclaim ownership of the car. Interest rates for logbook loans are usually extremely high. People often take up this kind of borrowing as a last resort.

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A New Way Of Borrowing

Logbook loans first came to prominence in the UK after the 2008 financial crisis. Banks and finance companies chose to tighten up on lending. The practice of borrowing money against the value of a car became more prevalent and became a growing part of the sub prime lending market. Many companies offer logbook loans. They claim that they are fast and simple to organise. Logbook loans are a great and hassle free way to solve your financial problems.

In this article we will take a closer look at logbook loans online offers. We will draw out the facts about a method of lending that has been compared to high interest payday loans. We will explain lending practices that prey on vulnerable people who urgently need to borrow and need fast bad credit personal loans.

A Logbook Loan Is a Form of Secured Loan

Unlike an unsecured payday loan, which is granted after substantial credit checks, a logbook loan is a form of secured lending. In short, you are putting up your vehicle as collateral against borrowing. This allows the loan company to lend without having to go through lengthy credit background checks. Even though the lender is less at risk, there is often a price to pay for borrowing, in the form of very high interest rates.

Logbook Loan
Amount borrowed £850
Length 12 months
APR 350%
Monthly repayment £259.97
Total cost of borrowing £2,269.64

Logbook Loans UK

It is very unlikely that you will have heard of any of the logbook loan companies in the UK. Certainly, no high street bank or well known reputable lender will offer this kind of finance. So it is no wonder that this kind of borrowing has a poor reputation.

Logbook Loans Borrowing Limits

The amount that you can borrow on a logbook loan will depend upon the value of your vehicle. Typically, you can take a logbook loan starting from £250 until £5,000. In addition to the value of the car, reputable loans companies will assess your personal circumstances and your ability to repay the loan. Some lenders offer an interest free first month and no payments until after two months. These offers will add to the total cost of the loan. The first month interest-free is fine, but the second month’s interest will be added to the loan and will make it more expensive. You must always look to compare personal loans online.

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Logbook Loans Online

Applying for a logbook loan is relatively simple and you can apply online. The agreement is usually easy to understand. Signing the contract means almost instant cash that can alleviate pressing financial problems. Your lender will transfer the funds directly into your nominated bank account. Following the transaction you can drive off in your own car, carry on as usual with your own life. As long as payments are made on time, all will be well.

Logbook Loans No Credit Check

Most logbook loans companies trade with customers who have a low credit score. In fact, they positively relish lending to people with a blemish on their credit history. In spite of a bad credit record you can probably get a logbook loan as long as your car has a high enough value. Credit defaults or County Court Judgements will affect your interest rates. However, you should be very wary of companies who offer logbook loans with no credit check. You wouldn’t take a job with someone who didn’t bother looking at your CV, so don’t take a loan with someone who doesn’t look at your financial records.

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Logbook Loan Collections

Customers have complained about aggressive tactics. Some lenders are quick to take possession of the car that has been signed over. In addition, Citizens Advice Bureau has had borrowers stating that they have received death threats as a form of intimidation prior to repossession of the car.

High Interest Rates On Car Logbook Loans

The rates of interest charged for logbook loans can be very high. In some cases, they could be described as horrific. APRs from logbook loan lenders are regularly advertised at 500% and sometimes higher. The average rate is around 200% (figure worked out from top ten logbook loans on Money websites).

logbook loans

The Risks Attached To Logbook Loans

Logbook loans are specifically aimed at the most vulnerable people, who find themselves shut out of normal lending channels. Smaller lending companies who want to make large profits in a short period of time often supply logbook loans.

Lending to high risk borrowers means the company will charge high interest rates and high fees if repayments are late or missed. Conditions of the loans are very strict, unlike flexible personal loans that are far more reasonable. It is not unusual for borrowers to find themselves in an unexpected emergency where they are unable to keep up the payments. They then lose their vehicle. This creates a further blot on the credit history of the borrower. So, the spiral into even more debt continues.

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Log Book Loans For A Car – Repossession

The thing that many borrowers don’t think about when they sign up for a logbook loan is that if they cannot or do not repay, they will lose their car.

Repossessing Your Car

If you resort to this form of borrowing and relinquish your logbook to the lender, then the lender owns your car until you have repaid in full all the loan money plus the interest. The lender may change the name on the logbook through the DVLA and in the event of a default in payments, they can sell the car without any court order. You might be better off considering a more regulated type of loan, such as a secured homeowner loan, should you own a home, or possibly a same day guarantor loan. Both of these are likely to have reasonable interest rates.

Additionally, a lender can charge you for any costs involved with repossessing and selling your own vehicle and if the sale price does not cover the outstanding loan amount, you will still be liable for the residue of the loan.

Logbook loans - Personal loans now

If you enter into an agreement of this kind, your lender might repossess your car if you fail to keep up the repayments. The lender can take your car and sell it on in order to cover the amount of money you have borrowed.

Logbook Loan Arrears – Your Rights

Under the terms of a logbook loan agreement any missed payment will result in contact from the lender. Failure to make up the missing payment will result in a default notice being issued. This gives you 14 days in which to make good your logbook loan account arrears. Lenders must wait for a further five days after default before they can demand repossession of the car. They do not need to take you to court to proceed.

Repossessed vehicles are normally towed away by either a debt collection agency or a bailiff. Your lender can repossess your vehicle at any time of the night or day. The enforcement proceeding are just that i.e. the representatives of the lenders can use force to take the vehicle.

Logbook loans - Personal loans now

Your lender can add removals costs to the charges on your outstanding loan amount. Then the car is sent to auction to be sold. Any extra sale proceeds over and above the outstanding loan must be repaid to you and any shortfall must be made up by you.

Alternatives To Repossession

Is there any alternative to repossession if you fail to make repayments on time? In theory, the answer is yes. Some logbook loan lenders have stated that they will try to come to some arrangement with customers who find themselves unable to make repayments. However, these arrangements can often involve large financial penalties. Your lender might apply a penalty when he sends out a reminder notice.

Code Of Practice For Logbook Lenders

Some logbook loan lenders have signed up to a code of practice that has been written by the CCTA (Consumer Credit Trader Association). The code offers some protection for customers.

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Under the CCTA code, lenders commit to four simple practices:

  • The lender will consider reducing the loan payments if there has been a change in the circumstances of the borrower
  • A customer can hand over the vehicle at any time to settle the debt if it becomes too difficult for them to continue with repayments
  • The lender will only repossess the car as a last resort to clear the outstanding debt
  • You have opportunity for a period of two weeks after repossession to pay off the debt and to get your car back

All logbook loans UK companies showing the CCTA logo must follow this code of practice.

The industry introduced a voluntary code of practice more than two years ago. Analysis by Citizens Advice of 261 cases between February 2011 and January 2014 suggests people flout the code of practise regularly. The average loan was £1,286. Some people had borrowed up to £19,000 and had paid back up to eight times the amount.

Selling your Car

If you have taken out a logbook loan against your car you must NOT sell the vehicle. This action would be breaking the law and the lender could take you to court.

Logbook loans - Personal loans now

Second Hand Vehicles With Logbook Loans

Reports in 2012 show that one in four second hand vehicles were sold still with outstanding finance. HPI (Hire Purchase Inspection) is a company that checks the history of finance on vehicles. Most car dealerships use this system to ensure that the cars they buy legally belong to the sellers. However, many ordinary people are unaware of the availability of this check. It is simple enough to pay £20 for a check on the HPI website. This check establishes the full ownership of a used car up for sale.

So, if you buy a car in good faith and it turns out to have some outstanding finance agreement on the vehicle, the lender can repossess the vehicle. Instances of second hand cars bought without a full HPI check have resulted in many people not only losing the money they have paid out for the vehicle but also the vehicle itself.

HPI also eliminates the chances of other hidden problems with second hand cars. One in three cars checked through HPI has some hidden history that the buyer may be unaware of. These include the possibility of the vehicle being stolen, being recorded as a total loss by an insurance company and number plate changes.

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Citizens Advice Bureau And Logbook Loan Campaign

The Citizens Advice Bureau has campaigned for some years for changes in the law regarding logbook loans. Statistics from their records of consumers taking out this type of loan show some frightening figures.

  • Lender treated 28% of people unfairly or inappropriately.
  • 17% had not had the terms of the loans clearly explained in a way they understood.
  • 17% had their car taken away despite not being the original borrower.
  • 14% experienced harsh debt collection practices.
  • 9% had a lack of proper checks to make sure the borrower could repay.
  • 8% were hit with high charges for defaulting on their loan.

The advice centre is campaigning to see an end to Logbook loans as they stand. They want them treated like other Hire Purchase agreements. This would mean an end to the automatic repossession of a vehicle. Lenders would have to get a court order to take the car and to sell it.

CAB Calls for Improvements to Logbook Loans

Citizens Advice is calling on the government and Financial Conduct Authority to require that lenders obtain a court order before they can take away a car. They also want to stop repossessions of cars that have been sold on with loans.

“The logbook industry is still in the dark ages and has been getting away with lawless practices,” said Gillian Guy, chief executive of Citizens Advice. “It is absolutely absurd that a firm should be able to take away someone’s possessions without any due legal process. High interest rates and lack of affordability checks, as well as threatening practices and phantom charges, mean logbook loans are a toxic mix of the worst parts of payday loans and unruly bailiffs.” – Source: The Guardian 16 February 2014.

Logbook loans - Personal loans now

Changes in the new law would protect third parties who purchased a car without any knowledge of an outstanding finance agreement. The Bureau also claims that people who take on logbook loans are becoming overloaded with debt due to irresponsible lending practices.

CAB Report Findings – Explained

This finding is the result of analysis of more than 23,000 cases of significant debt problems handled by bureaux between April and September 2013. It found 127 cases which involved a logbook loan (also known as bills of sale). The findings show, on average:

  • Logbook loan debts were worth more than double that of payday loan debts (£2,500 compared to £1,000)
  • People with logbook loans had a total of ten debts, including other forms of credit, that’s double the number of loans held by all debt clients (five)
  • 57% of clients with logbook loans also had one or more other type of high cost credit
  • 37% of clients with logbook loans also had one or more payday loan
  • The total amount of debt across all loans for people with logbook loans was £13,500.
  • 40% of people who took out a logbook loan are in work. 33% are unemployed and 27% not working due to things like caring responsibilities or ill-health

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Changes To Logbook Loans In 2017

The National Association of Motor Auctions (NAMA) reported on 13 February 2017 that the government is moving to change the law regarding logbook loans.

Lack of protection for customers is due to the old fashioned ‘bill of sale act’ that logbooks loans are constructed under. Changes in the law will provide better protection for borrowers, protections that are already in place for other secured personal loans. The law will also protect those who unwittingly buy second hand vehicles that still have a finance agreement attached to the ownership. Unlike other forms of borrowing, credit reference agencies do not register the agreements. Logbook loans do not show up on a credit check.

The Future Of Logbook Loans

Reforms that are due to be made to logbook loans are long overdue. Hopefully, parliament will enact reforms during the course of the year. It might be tempting to borrow using one of the companies offering this kind of easy to obtain loan. Nevertheless, you should always consider personal loans from logbook loan lenders as a lender of last resort.

You may desperately need some help with money problems. A better course of action would be to contact one of the many debt charities for help. They can help you to resolve your difficult financial situation.

You may turn to logbook loans because you don’t think you can get a regular personal loan. Maybe you need a personal loan for the unemployed, or perhaps you have bad credit. At Personal Loans Now, we have access to Monevo’s lenders panel consisting of a huge range of lenders, some of whom specialise in providing loans to those in unique circumstances. Give it a try, apply today and you may find that you don’t need a logbook loan after all.

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