Citizen’s Advice highlights log book loan peril

Did you know that a lender can seize your vehicle if the preceding owner has borrowed cash against the car and failed to spend off the debt?

It sounds improbable, but it is a real and growing threat to innocent motorists as more individuals take out logbook loans.

Repossession problem

The quantity of logbook loans is expected to soar to 60,000 this year, a jump of 61% on the figure for 2011, according to Citizens Suggestions. The charity is also concerned about the quantity of unwitting motorists whose automobiles are repossessed.

It located that 1 in 5 people who reported a problem about logbook loans had their automobile taken away, even even though they have been not the original borrower.

Inherited debt

1 man, for example, spent £1,100 on a second-hand auto only to get a letter from a logbook loans business demanding payment of £637.

The driver contacted the loan firm with the seller’s address, but somebody nonetheless turned up to take the car away.

The man then borrowed funds to spend off the preceding owner’s debt.

Legal scenario

Numerous people have never ever heard of logbook loans – 2 in 5 drivers, according to investigation by Citizens Advice. So it is probably no surprise that nearly half (44%) have no concept that a log book lender can take their vehicle away, even if they are not the original borrower.

Citizens Suggestions reckons it is tantamount to legalised theft and wants the law changed so that logbook lenders can not repossess someone’s automobile if they are not the original borrower.

‘Legalised theft’

Gillian Guy, the charity’s chief executive, says: “It is essentially legalised theft that logbook lenders can take vehicles from folks who are not the borrower. Innocent drivers ought to not have to bear the burden of a person else’s debt.”

Drivers can pay for a loan search just before they purchase a auto, but most don’t bother – 63% of utilised vehicle purchasers do not check for outstanding loans.

Also, some varieties of loans do not show up on the searches.

Secured loan

So what is a logbook loan? Basically, it is a loan secured against your vehicle. You hand over the logbook and the lender hands more than the cash. It’s a swift way to get hold of some funds. Plus, there are no credit checks.

You sign a form named a bill of sale, which grants the lender short-term ownership of the auto. But you can still use the car as long as you preserve up with the loan repayments.

If not, the lender can seize the vehicle – even if it has since been sold.

Grand designs

The typical loan quantity is £1,000, but the cost is high, with a standard APR of 400%. In other words, if you took out a loan of £1,500 and paid £55 a week for the normal term of 78 weeks, the total price would be £4250.

Logbook loans have currently come under fire from the Economic Conduct Authority, which earlier this month criticised lenders for poor standards.

Full implications

Citizens Suggestions is also calling for much better protections to make lenders treat their buyers pretty. Guy says: “Logbook loans do not just present a issue for car purchasers – borrowers themselves are getting exploited.

“The business is rife with irresponsible lending and some men and women are signing up to logbook loans not understanding the full implications due to the fact the outdated language isn’t clear.”

Citizen’s Advice highlights log book loan peril