Disadvantages of a Logbook Loan

Quick cash, no more credit checks and larger loan offers are some of the best advantages of a logbook loan. Unfortunately, it’s not all advantages with this type of product. Because logbook loans are specifically offered for people with bad credit, expect high cost and major risks. Here are two of the biggest disadvantages of a logbook loan:

High Representative APR

One of the major complaints about logbook loans is its high representative APR. On average, the loan has a whopping rep APR of 400% or higher. That means a lot of interest to pay for a personal loan. For a clearer picture of what a logbook loan will cost you, let's say you wish to borrow £1,500 to pay for overdue bills, buy some groceries and take care of a medical expense. The loan deal you applied for requires weekly payments. If the rep APR is 400%, you'll be paying £55 a week for 78 weeks. That's a grand total of £4,250!

Risk of Vehicle Repossession

It’s not just the cost that has experts telling borrowers to stay away from logbook loans. If you were not smart enough to stick with borrowing what you can only afford, you may find yourself unable to repay the loan at some point. If this happens, you risk losing your vehicle to repossession. As agreed upon on the loan terms, temporary ownership has been transferred to your lender. Since you were unable to repay the loan in full, your lender has the right to recover it as payment for your remaining loan balance.

Is a logbook loan worth it?

In most instances, getting a logbook loan is not a wise financial move. But when you have bad credit and you have no other option, a logbook loan may be the only financial move you have. In this case, just make sure you borrow only what you need. Then pay your monthly repayments on time. And understand how logbook loans really work. Click here for more info on this financial product.