Log book loans and personal debts explained
January 9, 2017
If you have a poor credit history and are not eligible for mainstream borrowing, log book loans offer a way to obtain finance quickly. They involve borrowing money against the value of your vehicle, and this becomes the property of the lender until the loan is repaid in full.
This type of loan has come under heavy criticism by money charities and consumer watchdogs, however, due to the high rate of interest applied, and there have been calls for more protection for borrowers. The fact that those applying for log book loans are often already in an unmanageable financial position adds further weight to the argument.
Irresponsible lending affecting personal debt
So how do log book loans work, what impact could they have on your personal debt position, and what are the inherent dangers of this type of borrowing?
What is a log book loan?
Also called a vehicle registration document, or form V5C, your log book details the vehicle’s previous and current owners, as well as the dates of purchase, and is used to update the Driver Vehicle Licensing Agency (DVLA) whenever a change of ownership takes place.
One of the main dangers of this type of loan is that your car can be repossessed by the lender if repayments fall behind, and once this happens, a high rate of interest makes it very difficult for borrowers to get back on track financially.
Loans are generally available between £500 and £50,000, and can be obtained from companies on the high street and via the internet. Interest is added weekly, often at extortionate rates of up to 400% (APR), which is why missing a payment can trigger the slide into a huge personal debt situation.
Log book loans in Scotland
In England, Wales and Northern Ireland, a ‘bill of sale’ system is used by log book loan companies, whereby bills of sale must be registered with the High Court if a lender is to have the right to repossess the vehicle at any point. Scotland uses a different system, however, as bills of sale are not legally binding here.
If you already have a log book loan, it could be in the form of a hire purchase agreement or ‘conditional sale,’ in which case you may have some protection under the Consumer Credit Act, 1974. Loan terms will vary between lenders, however, with some offering up to 78 weeks to repay.
In some cases you only repay the loan interest for most of the term, until the final month of the finance agreement when you must pay back the full original amount borrowed. Intimidation of borrowers by log book loan companies has been widely reported in the press, sparking further calls for protective action for consumers.
It’s worth noting that some second-hand car buyers have unwittingly purchased a vehicle with log book loan finance still attached. This means the loan company can repossess the car if the new buyer fails to repay, and the purchaser has little legal redress apart from suing the previous owner.
If you’re struggling to repay a log book loan or have overwhelming personal debt
The high cost of this type of borrowing has caused serious financial difficulty for consumers around the UK. The problem is so widespread that people in severe debt often need to enter a personal insolvency process to deal with the crisis.
Scotland Debt Solutions can offer expert help and advice to Scottish residents struggling to repay a log book loan or any other type of finance, and provide guidance on the best way to deal with high personal debt.
Scotland Debt Solutions has five offices around Scotland, and can offer a free confidential consultation to quickly establish your needs.
When taking out a joint loan, there are many things you need to consider. Signing up to a joint credit agreement is a huge commitment and it’s important to ensure you have all the facts before signing on the dotted line. While no one wants to think about a relationship breaking down, the truth is […]
If you’re looking to save some money it’s a good idea to make a detailed budget that lets you see where your cash is currently being spent, and offers an overall view of your finances. You’ll need to collect together your income and expenditure details, including annual costs such as insurance, car expenses, birthdays and […]
A trust deed is a common debt repayment programme based around a voluntary arrangement made between you, your creditors and a qualified independent trustee who takes control of your debt repayments for a typical period of four years. If you’re having difficulty paying your debts and have assets or a regular income, you may qualify […]
If you have built up debt from gambling, you may be able to write off part or all of the debt via a formal Scottish insolvency route. Not all insolvency solutions allow debts to be written off, but you may be eligible for a trust deed if you meet certain criteria, with sequestration also being a possibility […]
Her Majesty’s Revenues and Customs (HMRC) is one of the biggest creditors in Scotland, and indeed across the rest of the UK. Millions of people make payments to the government through HMRC in the form of income taxes, National Insurance and VAT every year. For the majority of people in employment, this is done automatically […]
Council tax is a charge levied on residential property and payable to the local council. While some properties are exempt from paying council tax, most households must factor this bill into their monthly budget. Households will be given a yearly charge which can then be broken down into a series of monthly instalments throughout the […]