The moment you append the signature on the logbook loan agreement form, it means that all the things details contained therein become abiding. It is the policy that will be used to ask for payment, repossess your car and even auction it in the event of default. Therefore, you have to read and reread through the lengthy document and get everything about the loan before signing.
Despite the numerous risks and high-interest rates associated with logbook loans, many borrowers rarely take a deeper look at the policy. In this post, we explore why it is very critical and what you should look for in a logbook loan policy.
Confirm the policy bears the mark of Consumer Credit Trade Association (CCTA)
While this is not a requirement by law for logbook lenders, a logbook lender who is a member of the association commits to a strict code of practice when dealing with clients. All the codes are meant to protect the industry from the bad publicity in the UK. In particular CCTA advocates for the following;
- Reduction of logbook loan payment if the circumstances change. For example, a client who had committed to repaying the loan for two years but now wants to repay in one year should have room for changes.
- Allow the borrower to hand over the vehicle in case he is unable to repay the loan. This is important because it removes the cost of recovery and months of default.
- Allows the car owner to repay the months of defaulted payment to get the car and continue paying the remaining amount.
Check whether the policy allows for renegotiation of the loan
While many people never anticipate they will default, things that are outside their control can happen and make them miss several payments. If you are finding it tough to meet the agreed payments; check whether the policy allows for renegotiation.
A good policy should be flexible enough to allow the borrower to adjust the repayment amount. For example, if you agreed with the logbook company to pay £120 every month, the company should be a little flexible on a request to change to £100/month.
The vehicle repossession procedure
In the UK, a logbook loan borrower is required to surrender the car logbook to the lender. This means that the ownership has been transferred temporarily to the lender. Because you are allowed to keep the car, you need to know about the repossession clauses in the lender’s policy.
If the lender indicates that the vehicle will be repossessed within a few days of default, do not borrow from that lender. Think of a situation when your salary delays and everything else has to wait. In such a situation, the lender should understand and not simply tow the car away.
Therefore, the best lender should indicate that the vehicle will only be towed away as the option of last resort. The lender should try all avenues to reach you and have the situation corrected before setting out to recover the car.
Unnecessarily punitive clauses
While many logbook loan companies are committed to their services, there are a few that include punitive clauses. These are the additions that you must look for and insist they are cleared before signing the deal. It is the role of the lender to ensure that all the expenses are covered within the APR. The only cost that you should accept outside the APR is that of recovering the car. You have to read between the lines to note such costs and have them expunged from the policy. Remember that it is very enlightening to compare policies from various logbook companies before selecting the right company.