Logbook Loans and a Trust Deed

28th September 2011

A trust deed can be an effective and protective solution to rising and unmanageable debts depending upon your circumstances. A less effective solution to dealing with debt can be a log book loan secured on your vehicle to raise cash to make other debt payments. If you miss repayments and default on the arrangement you risk losing your vehicle. Charging an APR that can easily be as much as 498 per cent, logbook loans are an expensive form of credit which can often be easily obtained without a credit check. Such log book loans can range from £500 to £50,000 depending on the value of your vehicle and are generally available as long as your vehicle does not have existing finance registered against it.

Due to a deteriorating credit record or escalating debt balances, some people who are already struggling with debt take out a logbook loan in an attempt to continue making their existing debt repayments without the need for a trust deed or other debt solutions.

If someone borrowed £1,500 via a logbook loan they could (in certain fairly typical circumstances) find themselves paying back £4388 over eighteen months with monthly repayments of around £244. This significant repayment, added to existing monthly commitments, can easily lead to an individual beginning to struggle financially. The end result of this could be missing a payment on the log book loan or to their other debts which may include credit cards, bank loans or even their mortgage. In many circumstances a far more appropriate and forward-looking solution to unmanageable debt is a trust deed.

Missing payments to a logbook loan will generally result in hefty fees being added to your account for collections activity (such as phone calls, letters or agents calling at your house). A relatively small loan can escalate quickly which could result in it becoming completely unmanageable. Debts which escalate in this manner are a common scenario prior to someone deciding to start a trust deed (and some may wish they had arranged a trust deed or debt solution of another type in the first place rather than jeopardising their car).

Defaulting on a log book loan could see your vehicle being repossessed by the company. Once they have disposed of the vehicle there could even be a shortfall debt created (where the amount the vehicle has been sold for is less than the loan amount outstanding) and you will be chased for payment even though your car has been taken. At this point the debt effectively becomes unsecured and could be included as a creditor in a trust deed.

If you are already struggling with your debt repayments you should consider your other options before you take out a log book loan, for example a trust deed or the Debt Arrangement Scheme (DAS) . Your car will not be taken into account in the Debt Arrangement Scheme. In a trust deed a car valued at less than £3000 will be ignored provided that there is a reasonable need to retain the vehicle (for example commuting).

You may already have a log book loan or maybe a shortfall on a previous logbook loan; this should not stop you seeking debt advice if you are struggling as you can still generally enter into a trust deed or the Debt Arrangement Scheme if this is the case. However, payments on an existing log book loan must continue or you risk seeing the car repossessed.

If you are considering a logbook loan due to debt problems, are struggling to pay for your log book loan and other debts, or have been handed a bill for a shortfall debt related to a logbook loan, we recommend that you seek the advice of a qualified debt or trust deed adviser. A trust deed adviser will discuss your circumstances in full with you and go through an income and expenditure exercise to see how much you can afford to pay towards your debts every month. If you have an existing log book loan and need to keep your car the monthly repayment will be included in the expenditure record.

A trust deed should always be considered to be a last resort. However, taking out a log book loan at a time where you are already financially vulnerable could leave you without a vehicle and without the means to obtain a new one. In such circumstances a trust deed (or other conventional debt solutions) might be a more appropriate route to take that will enable you to keep your vehicle.

To find out more about using a trust deed visit www.Trust-Deed.co.uk . The website contains a forum where you can speak to other people with similar experiences, and to professionally qualified industry experts. Avoid getting yourself deeper in debt by finding respected advice and assistance online or over the phone on 0800 043 7201.

Trust Deed Latest News