Shining light on Logbook loan risks

If you are unable to avail a loan through available conventional means, it might be time you thought of applying for logbook loans. Traditionally, getting approved for a loan while your credit score was in tatters was a herculean task, a long shot. It was simply unimaginable as lenders wouldn’t dare look at applications from individuals with a poor credit rating twice. It was therefore a nightmare for scores of individuals with bad credit seeking to avail a loan. The unveiling of logbook loans was therefore a great break, a momentous occasion and provided a platform through which individuals could avail emergency cash without worrying about the status of their credit score rearing its ugly head.

Taking into consideration the fact that credit checks are not done, simple requirements, opportunity to get cash up to 75% official current car value and the fact that even those with a history of arrears are brought on board, it isn’t hard to understand why logbook loans have become very popular. However, logbook loans also have a number of risks which have served to discourage a number of people from applying for them. What are some of the risks of logbook loans?

High interest rates

The major undoing about logbook loans has to do with the fact that the interest rates are very high. While the average APR for most UK logbook loan lenders is 400% it’s not unusual to find various lenders who charge higher interest rates than the average rate. The effect is that a person at times is forced to repay twice the principal amount. The high interest rates is justified by many lenders on the fact that they are trying to mitigate risks on their side or rather that logbook loans are used for short term borrowing purposes.

Risk of repossession

Should you fail to meet your obligations in repaying debt or fall way behind in repayments, you risk losing possession of your car. This is perhaps one of the greatest risk especially if you deal with rogue logbook loan lenders who move to repossess your car after defaulting for a month or two. For this reason, it’s advisable to carefully evaluate logbook loan lenders before applying.

Lack of peace of mind

There are logbook loan lenders that simply won’t give you peace of mind even if you default for a single month. You will have to deal with incessant calls and threats of repossession if you do not repay the loan. Collection bureaus are always at your door asking for money and there are even cases of lenders sending people to break into your property with the aim of repossessing your car. For this reason, be careful before you make the final decision to apply for a logbook loan and ensure that the lender you settle for has a solid reputation, a good track record and professional in every aspect.