If you are considering pawning away your car and would rather keep driving it, thereby entering into a scheme popularly called the logbook loan, then the first thing you should know is that your car is as good as sold. This may seem a bit harsh, but the reality is that most of the logbook loans end with either the car being repossessed or the person who took out the loan illegally trying to sell the car. The least probable possibility is that the loan is paid back in full. Yes, you are in financial trouble, yes, you need money if possible yesterday and yes, you will take out this loan no matter what you read here, but if you remember anything from this article, remember that once you put your signature on that bill of sale, your car is as good as gone.
Bill of sale is an old legislation from 1878, which circumvents the need for a court to allow your car to be repossessed. If you are late with payments, whereby the arrears may amount to only one late payment, the lender has the right to simply take your car, no questions asked and it is fully legal. You have no right to the car almost immediately after you are in breach of contract, which is generally very unfavourable for clients. Even if you bothered to read the small print, you are still liable for any breach of contract and the immediate action is to take your car – they already have your logbook, or rather your vehicle registration certificate.
Generally a logbook loan is very seldom a good idea. Even if you are blacklisted by a bad credit report, there are ways how you can escape financial troubles, without having to accept such extremely high APR rates and other conditions. You can always try to consolidate your financial standing, by asking for help at the right places, such as Citizens Advice Bureau, or any charity that offers debt consolidation for free. Even the UK Government offers such advisory offices, you can check the FCA website for a local office, or simply google for debt consolidation or debt management charities in the UK. You can even shop around, ask at the Citizens Advice which are the best and get help before you cross the line of no return.
On the other hand, if you are dead set to get a logbook loan, then you must look for one that has the FCA good conduct certificate and which also has the lowest APR. Never accept the first offer you get, because it will never be the best offer you can find. Shop around, get quotes, inquire with which lender customers were generally satisfied and such. Do not use the logbook loan to consolidate your debt and do not simply cover a short-term debt, just so you can pay back four times that amount over a longer period of time. People tend to do the wrong thing, once they are in the clutches of a mounting debt and bad financial situation, but it is always a smart thing to consider all options, before opting for the least sane solution.
Logbook loans were under investigation by the government and currently are again, because there are fears that lenders take advantage of people in bad financial situations and mount debts by rolling loans over and over, up until it is impossible for the customer to pay back the debt. There are legit businesses out there, but chances are you will stumble upon the one that is on the borderline and you will not only lose your car, but remain in debt as well.