V5 loans, or logbook loans, as they are known, are loans you can secure with your vehicle. The best thing about them is that you don't have to hand over your car; just your logbook and registration papers. You get to keep the car to use and the money, which seems like the best of both worlds. But there are some risks involved, namely losing your car to the lender, if you fail to repay the loan. So let's talk about everything surrounding V5 loans: important points to consider and how to calm your fears.
Is My Car Safe?
By far, the number one thing people stress out about when it comes to V5 loans is losing their car to the lender. I'm not going to lie to you: yes, you can lose your car; that's definitely a possibility that you should be aware of. But you will benefit from knowing exactly what's going to happen and how you end up in that situation, so you know how you can avoid it.
They will not repossess your car as soon as you're late on a payment
So, first of all, let's make one thing clear - as long as you make your payments on time and don't skip them, you are safe, your car is safe, and you will get your documents back with no issues at all. The problems begin once you stop paying, or if you're late on payments, but even then, remember the fact that you will not lose your car the second after your latest instalment is due.
If you find yourself unable to pay, let your lender know and you may be able to work out a different payment agreement. If you don't communicate with the company, if you dodge their calls, and if you fall behind on several payments, then yes - repossession is on the table.
They will not repossess your car without you knowing about it
Even if you do fall behind and are at risk of repossession, your car will not be taken without you knowing it. You will receive a notification that you can respond to within 14 days. If you take this opportunity to reach out to the lender, you may be able to negotiate yourself out of a repossession. If you ignore it, then after 14 days, they are legally entitled to your vehicle.
But - yes, there is still a "but" - the legality of the repossession is contingent on the bill of sale. The bill of sale is the document that allows you to continue to use your asset, even though you've handed over ownership to the lender. However, it needs to be registered with the High Court in order for them to be legally allowed to take your car. Without this registration, they would need a court order. This falls under the code of practice from The Consumer Credit Trade Association (CCTA).
What About The Bad Press?
You may know, logbook loans and V5 loan providers have been in a bit of hot water over the last few years because of practices that made it possible to sell a car second-hand and then repossess it from the new owner, if it had been used to secure a logbook loan. There's been quite a bit of bad press surrounding them, which has understandably put a lot of people off. After all, why would you risk your car and your money, when you can simply opt for alternatives?
You will be glad to know that the issues surrounding logbook loans has been resolved thanks to a new law regarding V5 loans, enacted in 2017. This law closed the loophole and you no longer have to worry about having a second-hand car repossessed with no recourse.
How To Protect Yourself
But if you're still apprehensive about getting V5 loans, then what might help you is knowing what you can do to protect yourself against scams to the best of your abilities. There are several things you can do in order to make sure you are completely protected and not at any kind of risk.
Research the company
First of all, before you even negotiate or sign anything, take a good look at the company. Check the physical establishment, as well as their history online, whether they're registered, if they've had any complaints, etc. Taking some time to look into their past goes a long way and can shed some light on whether or not they are a trustworthy institution.
Get your car assessed independently
The important thing to know with a logbook loan is that your car needs to be assessed by a third part and never by the lending company. A company who offers or insists to make the assessment is directly interested to assess the car at a lower value, so they can give you less money and even hopefully take your car and make a massive profit. If the lender suggests making the assessment themselves, run.
Check if the bill of sale is registered
It's good practice to go and check if the bill of sale is registered, so that you know where they stand legally and if they're even allowed to take your car. If you know it's not registered and they try to repossess, do not allow them to take the vehicle without a court order.
Make all of your payments on time
Of course, the best thing you can do for yourself and your car is to stay on top of your payments. The foolproof way is to set up a direct debit, so that the payments are made automatically every single month and you know for sure everything is ok. That way, you never have to worry about possibly losing your car.
In conclusion, while there are risks associated with V5 solutions, most of them can be circumvented and prevented entirely by engaging in sensible and responsible behavior, including repaying your loan consistently and doing a background check on the company to make sure it's legitimate.