What happens if I can't repay my logbook loan?
We appreciate that one’s financial circumstances can change which is why we explain the various procedures and consequences if you cannot repay your logbook loan on time.
Logbook collection practices
Repayments from your logbook loan will be taken out automatically from your debit account on the dates agreed between you and the lender beforehand. To give you warning about the repayments, the lender will typically send you an email and SMS on the days leading up to each repayment. If your repayment does not go through, you may receive further emails, SMS, letters and phone calls from the lender to follow up on your repayment.
Repossession of your vehicle
The logbook lenders will always get in touch with you first if you have not been able to make repayment. The lender may repossess your vehicle and sell it to cover the cost of the loan repayment. The lender is entitled to sell your vehicle without a court order as stated in the Bill of Sale that you would have signed during the application process.
What if my vehicle is sold?
If the lender has sold your vehicle to cover repayment, you may get in touch with the lender and try to buy it back from the party who they sold it to, although this will incur further costs. More importantly, if the amount that the car is sold for is less than what you owe (because the lender overvalued it), you will be responsible for paying the shortfall so the lender can recover your loan value. A logbook loan company can take you to court to get this money back. Customers must be aware that by failing to repay, they could end up owing more than the original debt as well as the loss of their vehicle.
The impact on your credit score
Although the lender does not run a credit check during the application process, failing to repay may have a negative impact on your credit file. The fact that you have missed a repayment or failed to repay a loan must be reported to a credit reference agency and made aware to other potential lenders. This ensures that you are not easily given access to further loans that may increase your level of debt. If you apply elsewhere and the lender runs a credit check, they will know that you may not be in the best financial position to take on more credit.
Failing to repay on time will usually incur a default charge of up to £25 and a further charge for every default letter that has been sent out. If you do not respond to any of the calls, emails or letters, an agent will be sent to your house to discuss repayment and there is also a call-out charge for this. It is very important to understand the added costs involved if you do not meet repayment.
What you should do if you cannot repay your logbook loan
It is crucial to respond to any correspondence sent by the lender in order to minimise cost and damage to your credit score. If you know in advance that you may not be able to make repayment at the end of the month, it is important to get in touch before the payment is due. The lender may be able to offer forbearance and be sensitive to your financial circumstances. This may result in the lender offering you an ‘arrangement’ or ‘pay plan’ which will lower the monthly repayments and spread them over a longer period of time, making the loan more flexible and easy to repay.