Logbook loans offer a borrowing avenue against the value of your car, albeit with distinct risks and implications. Unlike conventional loans, these are secured against your vehicle, making them a unique but potentially risky financial option.
A logbook loan involves borrowing money secured against the value of your vehicle. You essentially transfer ownership of your car to the loan provider until the debt is repaid, typically in smaller amounts compared to traditional loans. Despite being a secured debt, logbook loans lack the same level of security as mainstream finance agreements.
To secure a logbook loan, you surrender your Vehicle Registration Certificate (V5C form), commonly known as the logbook, to the lender in exchange for the loan amount. This document serves as collateral until the debt is settled. Notably, you retain the right to use your vehicle while repaying the loan.
Many individuals resort to logbook loans due to financial difficulties, often exacerbated by existing money problems. Despite their accessibility, these loans come with exorbitant interest rates, sometimes reaching up to 450%. The absence of credit checks may make them appealing to those facing financial challenges, but they remain a risky option.
Failure to meet logbook loan repayments can lead to repossession of your vehicle by the loan provider. With a ‘bill of sale’ in place, the lender gains ownership of the car, making repossession swift and straightforward. This poses significant risks, particularly if you rely on the vehicle for essential purposes like work.
Upon repossession, the lender typically sells the vehicle at auction to recover the outstanding debt. Any shortfall between the sale proceeds and the debt amount remains your responsibility, potentially leading to further financial strain.
Protecting your vehicle from logbook loan lenders in arrears is challenging, given the lender’s ownership rights. Unlike other creditors, logbook loan providers have fewer procedural hurdles to reclaim the vehicle.
Logbook loans lack the consumer protections associated with mainstream finance options. They often entail additional fees and charges, with lenders having the authority to employ aggressive debt collection tactics, including involving bailiffs, without court intervention.
For individuals considering logbook loans or struggling with debt, seeking professional advice is crucial. Organizations like My Debt Plan provide free and impartial debt advice, helping individuals navigate their financial challenges and explore viable solutions.
Contact My Debt Plan today for immediate assistance and tailored debt management advice. Our trained advisers are equipped to offer personalized solutions to address your financial concerns effectively. Call us now at 0161 826 0585 or fill out our contact us form to get started on your journey to financial stability.
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Lucy Novo Deakin is a licensed insolvency practitioner in the UK by the Insolvency Practitioners Association (IPA).
My Debt Plan Ltd provides insolvency solutions to individuals, specialising in IVA’s. All advice given is provided in reasonable contemplation of an insolvency appointment. Where you are not suitable for an IVA, we may refer you to one of our trusted partners who specialise on alternative solutions, and as such we will receive payment for the introduction if you enter into a debt solution with one of our partner companies.
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**Of 2,381 IVA cases approved between January-December 2023, the average expected write off assuming successful completion is 74%.
A debt write off amount between 25% and 75% is realistic, however, the debt write off amount will differ for each customer upon their individual financial circumstances and is subject to approval of their creditors. Any remaining qualifying unsecured debt in your IVA will be written off, however some unsecured debts will be excluded, such as court fines, child maintenance and student loans, therefore you will need to continue paying these both during and after the IVA.
