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Log book loan covid deferral

Hi, hoping someone can help. I had around £600 leftvto pay to my log book loan (roughly 6 months) . I asked for Covid deferral due to loss of business. That time is up and now £800 odd has been added to final amount as they see every month deferred as an extra month of payment added. I thought these deferrals were by way of gov help. Id have expected interest but not 6 whole months to just be added on. Is this right/lawful? Im finding it hard to get my head around this being called 'help'. Any advice appreciated. Thanks 
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Comments

  • Ebe_Scrooge
    Ebe_Scrooge Posts: 7,320 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    edited 12 February 2021 pm28 12:06PM
    Ask them for a breakdown of what the extra £800 represents.  You're correct in that interest would continue to accrue during the payment holiday - and would be more than would ordinarily accrue, due to the fact that the capital was not being paid off as it would normally.  The other thing to bear in mind is that the total amount still has to be repaid - this can be achieved either by increasing the monthly payment, or by extending the term.  So overall yes, the amount you end up paying would be more than originally stated due to the increased amount of interest, but an additional £800 on a £600 balance would seem to be incorrect.
  • Thank you. 

    They basically said that however many months I stopped for would still have to be paid on top of the remaining balance. Its advertised as a way to help but it really is so far from helping. I just dont know if its legal. Ill have to pay so as not to lose my car but hate the thought of being so ill treated and possibly illeally treated.  
  • No, that's not right - they can't charge you twice.  They're right in that the months you didn't pay still have to be paid at some point.  I'm suspecting that maybe the balance of £600 that you're seeing was an illustration based on the assumption that you hadn't had a payment break.  To try and give a simplified example .....
    Take a loan for £1200, over one year. Payments are £100 per month (ignoring interest for the sake of simplicity).  You pay £100 in Jan, Feb and March.  Balance is now £900.  Don't pay in Apr, May and June.  Balance is still £900.  But the "illustrated" balance may be £600, worked out as if you'd paid every month.  The actual balance is still £900.
    Not sure if I've explained that very well, but hopefully you get my drift.  And like I said, you will have been charged more interest for the months where the balance was not reducing - you'll have been charged <whatever> percent on the £900 for 3 months in this example, rather on £900, then £800, then £700 etc.
  • Herzlos
    Herzlos Posts: 15,393 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    You should be paying a bit more, but unless it's at a horrible rate it shouldn't be much.
    Each month deferred should see the balance rise by the interest accrued in that month (which is compounded, as the previous months balance is factored in).
    As for a breakdown of the costs as I don't think they are allowed to add any fees, just the interest.
  • Herzlos said:
    You should be paying a bit more, but unless it's at a horrible rate it shouldn't be much.
    Each month deferred should see the balance rise by the interest accrued in that month (which is compounded, as the previous months balance is factored in).
    As for a breakdown of the costs as I don't think they are allowed to add any fees, just the interest.
    It's a logbook loan so the rate is most likely horrific.  Accord to MAS the typical APR for a logbook loan is 400%+

    https://www.moneyadviceservice.org.uk/en/articles/logbook-loans
  • Lh770 said:
    Thank you. 

    They basically said that however many months I stopped for would still have to be paid on top of the remaining balance. Its advertised as a way to help but it really is so far from helping. I just dont know if its legal. Ill have to pay so as not to lose my car but hate the thought of being so ill treated and possibly illeally treated.  
    I don't think the lender is doing anything illegal here.  I think what you're seeing is the effect of compound interest accruing when you have stopped repaying the capital.
  • I had a logbook loan with loans2go many years ago, they are disastrous I ended up selling my car in the end just to get rid of it the interest is unbelievable but at the time you take it you need the money. Do you have any other lending options or any family that maybe able to help you clear it? If you do then get rid of it and never use them again they are worse than payday loans
  • 2021BJ
    2021BJ Posts: 307 Forumite
    100 Posts Name Dropper
    Lh770 said:
    Thank you. 

    They basically said that however many months I stopped for would still have to be paid on top of the remaining balance. Its advertised as a way to help but it really is so far from helping. I just dont know if its legal. Ill have to pay so as not to lose my car but hate the thought of being so ill treated and possibly illeally treated.  
    It is a way to help, it avoided you defaulting and losing the car whilst you (hopefully) got back on track.  Now it's time to pay the piper, these payment holidays were never advertised as interest freezes.

    You'll need to look at your loan agreement to see what interest is charged but as other have said, logbook loans have an eye-watering rate of interest so an extra £800 after not paying for 6 months isn't too hard to believe.
  • molerat
    molerat Posts: 33,514 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    edited 13 February 2021 am28 9:22AM
    Just picked a random log book loan company from Google.  209.42% APR "typical" .  A £600 balance at that rate incurs interest in excess of £100 per month so a 6 month break could easily head towards £800.
  • nyermen
    nyermen Posts: 1,130 Forumite
    Tenth Anniversary 1,000 Posts Name Dropper
    We need to know the APR.  As I understand OP ("800 added to the final amount"), the debt of £600 is now an additional £800 (ie. £1400).  To gain that much in 6 months if so, must be an obscenely high APR.
    Peter

    Debt free - finally finished paying off £20k + Interest.
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