Why you should avoid logbook loans

Why consider a logbook loan when there are other loans available? The loan is too risky it must be avoided.

09:07 21 September 2013

Logbook loans are secured loans on your car, meaning, the lender owns the car until you make the repayment.  As long as you make partial repayments, you may be allowed to use the car. 

Logbook loans which offer no credit check and fast cash are available even on the street and on the internet.  Although you can borrow any amount from £500  to £50000 , you may borrow only up to 50% of the value of your car.

• How it works

You hand over your proof of ownership of the vehicle in exchange for a logbook loan.

You will be asked to sign a credit agreement called bill of sale as proof that your lender owns the vehicle temporarily though you will be allowed use of vehicle while making repayments. A bill of sale is recognised by law in England, Wales and Northern Ireland except in Scotland.

The bill of sale must be registered with the High Court to be recognised.  If not, the lender will have to get the approval of a court in order to repossess your vehicle.

• Receiving the logbook loan

Payment is usually made with a cheque which takes days to clear. Some logbook loan lenders offer fast cash but charge 4% of the loan for providing this service.

• Loan Repayment

Many logbook loans extend for up to 78 weeks though you may be able to repay earlier than that.

Your monthly payments are only for interests and full repayment will be on before entering into one, and make sure that you are capable to repay the loan.

• The cost of the loan

With extremely high interest rates, you pay for just the interest alone almost twice the loan you made. That means more than 100% of the loan is charged for the interest alone.

• When you fail to pay back your logbook loan

Logbook loan lenders can seize you vehicle if you are not able to make the repayment. However, they will not sell your vehicle until you make several default payments.  The risk for losing your vehicle is too high because they have the right to recover your car with no need to go to court.