Are Log Book Car Loans A Good Idea?

When you need money quickly, there are a few different ways you can go about getting it.

There are unsecured loans, secured loans, and V5 or logbook loans. Logbook loans are ones that are secured against your car. There are specialist loan companies that will allow you to borrow a percentage of your vehicles trade value. The down side of this type of loan is that you wind up paying a steep interest rate on the repayment side.

 

Logbook car loans allow the lending company to retain the original documents for your vehicle. These documents include your registration - which is known as the logbook or V5 - your MOT certificate and the insurance certificate. You will be required to sign a credit agreement and a ‘bill of sale' that temporarily gives the lender the ownership of your vehicle until the logbook loan is completely paid off. If you default on the loan, the lender has the authority to take possession of the car. When this happens, the lender will sell the car at an auction with the proceeds going to pay off your loan. If there is still money owed on the car, you will need to pay the rest of the loan off.


V5 loans are selected by people who need money within 24 hours. The application is simple, and if they are desperate for money this is the type of loan that appeals to them the most. One of the other reasons people opt to take out this type of loan is because they have bad credit and have been refused a line of credit everywhere else. The only criteria that they meet are that they are the registered owner of the vehicle. Logbook lenders usually and deliberately target people with unfavourable credit.
The average interest rate on logbook loans tends to be around 300 to 400 percent. They are also very easy to default on because of this high interest rate, which is what the lender hopes you will do. They want you to default so that they can repossess the vehicle and resell it, making money both from the car and you because they could sell the car for considerably less and make you pay off more money. Additionally, the ‘bill of sale' that you sign when you borrow the money allows the lender to contravene the law that allows only registered owners to sell the car.


Logbook loan lenders are not regulated by the Financial Services Authority (FSA) and that means that they are not obligated to comply with the FSA's fair customer treatment guidelines. All the lenders need to conduct business and make loans is a Consumer Credit License making them only compliant with the Consumer Credit Act.

Unfortunately these companies have been known to target people who are vulnerable and in desperate need of money. They have been criticised for under-valuing the cars when they make the agreement with the debtor, and they tend to harass the debtors to the point that they have been known to sell the vehicles before the debtor has the money to pay off the default. Customers can challenge interest rates that are considered unfair, but until the logbook companies are regulated and forced to treat their customers fairly, they are a good business to stay away from. If you need a loan, we can help you find a reliable company to borrow from.

 




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