Logbook loans are becoming more and more popular among vehicle owners, but did you know a lot of people are put off them because of all sorts of crazy myths circulating?
For years, these loans have been getting bad publicity because of some very common misconceptions about the safety of the transactions or how genuine they are. No one wants to be scammed and lose their car, so people are wary. This is why it’s important to debunk these myths and settle the issue once and for all by explaining what fake information is and what is the truth. You can also read an interesting guide on logbook loans by Logbook Loans Online if you feel your questions haven’t been answered below.
1. You Will Lose Your Car
MYTH: A lot of people are extremely wary of opting for logbook loans, because they believe it’s incredibly risky and will end up losing the car to the lender, without a doubt. Repossession is a nightmare, and the lending company will scam you out of your car if you make the mistake of handing over the papers. Once you’ve offered the lender the V5 papers, it’s basically over and you can say goodbye to your car.
FACT: Obviously all of that is completely exaggerated and most of it is fear-mongering. The truth is that yes, with any secured loan – including logbook loans – there is certainly a possibility that you will lose the asset to the lender. That is a calculated risk a borrower takes.
However, in order to arrive to such a point, you would need to stop repaying your regular instalments. There is a long way to go to repossession, and no one will come over and take your car away in the dead of night. They will first try to work out an agreement, then they will notify you in writing and you have 14 days to respond. If you do not, then they can come claim your vehicle, assuming the bill of sale is properly registered.
2. Your Vehicle Will Be Assessed Poorly
MYTH: One of the other major fears borrowers have is that the value of the vehicle will be assessed in favour of the lender. They will take one look at your car, lowball you, and then you are going to be forced to accept a deal that clearly puts you at a disadvantage and does not do your car justice. If can end up losing your car for an amount that’s not even worth it!
FACT: Information surrounding the value assessment may not always be truthful and complete, which is why it’s important to receive accurate information and advice from a reliable source. When it comes to the assessment of your vehicle, make sure it is always done by an independent third-party.
The fears of an intentionally incorrect assessment are based in reality, if the assessment is carried out by the lender themselves. You see, the lender does have a vested interest in assessing the vehicle poorly, in order to offer you less money, but be able to get more for your car, should you default on your loan. That is why it is so important that you walk out if a lender ever offers or insists to make the assessment in-house. A reputable lender will point you in the direction of an independent assessment.
3. You Will Get A Low Amount Of Money
MYTH: Logbook loans are scams because they never give you the full amount of money. They offer you a ridiculous amount in exchange for your car and set you up with high interest rates, so when you lose it, they get to make a massive profit off your vehicle.
FACT: The grain of truth in the above statement is that, indeed, the lender will never offer you – or give you – the full amount the vehicle is assessed at. However, you should expect a lending company to give you a high percentage of that amount; around 70% or 80%. There are lenders that will try to offer you around 50 per cent, but you can always look for a better deal. Generally, no one will try to get you to accept less than half, but don’t settle for that kind of contract, because at that point, you are knowingly getting scammed.
4. You Will Get Scammed When Purchasing A Car Second Hand
MYTH: You can never buy a car second-hand because you never know whether or not the vehicle was repossessed in the past. If the previous owner used the car to secure a logbook loan but couldn’t repay, the lender will take their car, sell it to recuperate the money, but will then come after you as well, claiming that you need to pay off the previous owner’s debt! Or they’ll repossess your car! Logbook loans ruined buying and selling previously owner cars and there is no way to be safe when you’re involved in such a transaction.
FACT: It’s true that there have been some issues in the past regarding buying and selling vehicles second-hand. Because of a loophole in a law, it was possible for a vehicle to be used as collateral for a logbook loan, be repossessed and/or sold, and then for the lending company to come after the new owner for an alleged debt that came with the car at the moment of purchase. However, that issue’s been sorted and the loophole closed by the Treasury, and the new, revised law will be coming into effect.
As you can see, there is a lot of misinformation out there surrounding logbook loans, and these myths can hurt borrowers’ chances and options. One should not avoid a completely valid form of lending because of some rumours, especially since they are all misunderstandings or patently false. Before believing anything you hear, positive or negative, take the time to research the matter independently and come to a conclusion dictated by the information you were able to find.
