Around 50,000 car owners in the UK take out a logbook loan each year when they need cash, as it can be an easier way of borrowing money compared with a traditional lender like a high street bank. For people who find it difficult to access other forms of lending, or those who need money quickly for a financial emergency, such as a larger than usual bill, or a home repair, it can help them to survive a challenging situation.
However, before you take the plunge, it’s important to fully understand what happens if you can’t repay a logbook loan to ensure this type of borrowing is right for you.
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What is a logbook loan?
A logbook loan enables you to use your car as security to borrow money, with the lender owning the vehicle until you pay back the finance in full. If you meet the eligibility criteria, you must sign an agreement to transfer ownership of the car to the lender in order to receive cash. While you can still use your vehicle during the repayment period, if you fail to pay back the loan, a lender is within their rights to take and sell your car to recoup their money.
A responsible lender will always ensure the loan is affordable and has manageable repayments.
What type of vehicles can be used as security?
Usually, the vehicle should be less than ten years old, but it’s also possible to lend against older vehicles, subject to their trade value, as classic cars logbook loans are an option.
Vintage cars with less miles on the clock will have a higher trade value than those that have not been well looked after, or have been “round the block” a few times. Owners can contact the lender to enquire about logbook loans for older cars if they feel it is worthy of consideration.
True classic cars and other models, such as rare sports cars, for example, are often viewed on an individual basis to assess their value and determine whether they’re suitable collateral for vintage cars logbook loans. In addition, loans for motorbikes, commercial vehicles, vans, caravans and motorhomes are also a possibility.
Risks of late repayments
Wondering what will happen if you can’t repay a logbook loan? It’s important to be aware of the potential consequences of late repayments, including repossession of the vehicle. However, this will normally happen only as a last resort, when all other avenues to get you back on track have been explored.
As a borrower, if your circumstances change and you suffer financial difficulties, a reputable lender will act sensibly and compassionately to try and assist you by agreeing a workable repayment plan. The objective is to help borrowers catch up missed payments in a realistic and fair manner and remain on track for the duration of the loan.
However, bear in mind the loan is secured on your car, which may be at risk of repossession if you don’t keep up with repayments. The vehicle remains in the ownership of the lender until the loan is fully repaid. In addition, missed or delayed payments can negatively affect your finances in the long term. This could potentially add interest or fees, and could increase the total amount to be repaid.
What should you do if you can’t repay?
If you begin to struggle financially with a logbook loan repayment, the worst thing you can do is bury your head in the sand. Communicate with the lender to let them know you have a problem, as they will be willing to help you work through it, as long as you’re honest.
The other options for handling the situation are exploring alternative solutions, such as asking a family member or friend if they can help you in the short term, or seeking professional financial advice.
Always be transparent in your dealings with the lender and make sure you fully understand their loan terms. Don’t be afraid to ask if there’s anything you don’t understand during the lending process. Stay proactive with payments and should you begin to have problems, contact the lender at your earliest convenience to discuss a way forward.
By law, the lender must send you a default notice before beginning repossession proceedings, giving you 14 days to respond, but realistically, neither party wants the situation to get this far without trying to resolve things amicably and responsibly. Some logbook lenders may consider reducing your repayments for a period if your circumstances have changed. It’s a good idea to get debt advice to see what your options are: never ignore the problem!
