Over the years, logbook loans have been a famous loan option in the United Kingdom, especially for those who have non-existent or low credit scores. Logbook loans have been a perfect solution to get that much needed cash without any credit checks of sorts, and approval is almost instant. A logbook loan works by surrendering the borrower’s vehicle logbook or V5 document to the lender, which serves as a form of collateral against the loan. This can only be taken back after the loan is paid in full.
However, in line with the logbook loan’s tremendous popularity, the cases of outstanding loans among second-hand cars rose to one out of four. Since the interests in logbook loans are high, usually at around 400% APR, a lot of borrowers have failed to make repayments. These sellers who weren’t able to pay off their loans choose to transfer the debt by selling the car on a bargain. Before you know it, the car you bought has an outstanding finance on it, and you might end up with no car and no money.
So what Can You Do?
Unfortunately, there are dangers in sales of cars that are subject of logbook loans and such dangers are adverse to the new buyer. If you purchased a second-hand car and the lending company’s representatives suddenly come knocking on your door claiming that newly acquired vehicle of yours, there is nothing much you can do to stop them from taking it, unless you pay for the outstanding balance left by the previous owner. According to the Consumer Credit Trade Association (CCTA) Code of Practice, an innocent buyer who purchased a used car in good faith cannot gain the ownership of the car, unless the logbook loan company failed to register the agreement between 24 hours of its creation. In this case, the debtor and previous owner of the car will be liable.
Although the Code of Practice provides added protection to the buyer, it does not guarantee a win. A court order is not even necessary for the lender to seize the vehicle should the original owner defaults and the loan was registered accordingly. If you were the buyer in good faith, you cannot do anything about it. Instead of looking at solutions to the problems, you should prevent them from happening in the first place. Before buying a car, especially a used one, perform a complete history check in DVLA databases and HPI to make sure it is not stolen or subject to any loan.
If in case you already bought a car that has an outstanding finance on it, you need to protect your rights. Require that the lender show proof of the logbook loan, the bill of sale, proof of identity of the lender, and other documents. Check also if the company is registered. If unfortunately the deed was legal and you found no loophole to keep your vehicle, your only remedy is to go after the previous owner and try to take your money back by bringing him to court. In addition, if the logbook loan lender had shown any inappropriate behavior while taking the vehicle, you can file a complaint against the company and its representative.