There is a general agreement that ignorance is bliss and what you don’t know doesn’t hurt you. While this would apply in many other scenarios, it doesn’t apply to buying a car that has a logbook loan attached to it. It is not okay to just wake up one day and buy a car from a friend or colleague without doing diligence. With the popularity of logbook loans in the UK, chances are that the car you might be buying has an outstanding finance to it.

Before we get into why it’s a bad idea to buy a car with a logbook loan attachment to it, let’s understand what a logbook loan is. A logbook loan is essentially a secured bad credit loan where a borrower uses his car as security to get access to credit. It is a fairly popular means of borrowing for individuals with bad credit or those who have filed for bankruptcy in the past. Of course, the allure for logbook loans has to do with the fact that credit checks do not play an integral role in determining whether a person is approved for the loan or not.

That said, how is a logbook loan agreement arrived at?

Well, when you express interest to apply for a logbook loan, the lender will first assess whether you meet the basic requirements and if your car is in good condition. Of course, the amount you are entitled to under a V5 loan is informed by the value of your car as well as your ability to repay the same. Once the lender is convinced that you qualify, you will sign two agreements. One is a personal loan agreement and the second is a bill of sale agreement. The bill of sale agreement simply states that you have transferred the ownership of the car to the lender and therefore you have no right to sell it so long as you are still servicing your loan. It also gives the lender the right to repossess your car should you be unable to repay the loan in totality.

In other words, once you take a logbook loan, the car is no longer yours but rather the property of the lender. You are therefore prohibited from selling the same. That said, that has not deterred several car owners to sell their cars with logbook loan attachment to unsuspecting customers.

Never ever buy a car with outstanding finance!

The reality of the matter is that buying a car with a logbook loan attachment to it is akin to flushing your hard earned money down the toilet. You are not the legal owner of the car and any agreement you entered into with the car seller is null and void under the UK laws. The logbook loan lender has the legal right to repossess the car and you will be left with an egg on the face.

How can you avoid this scenario?

Well, before you buy any car, ensure that you subject it to a HPI check to ensure that there is no logbook loan attached to it. Only buy a car from a dealer when you are sure that it’s free of any financial attachment!