No doubt, the appeal of logbook loans lies in the allure of quick cash without one's credit score status rearing its ugly head. It is, without a doubt, one of the reasons as to why logbook loans in a very short period of time have become immensely popular. Even individuals with a history of county court judgements can apply and get approved for a logbook loan so long as they have a car to present as security. In all honesty, logbook loans have indeed given bad credit UK citizens a new lease of life and the gift of a stress-free loan application. However, in as much as logbook loans boast of many benefits, there is also a dark side to them.
In other words, there are risks that come with applying for logbook loans which if a person is not careful, might find himself in a worse condition than he was before he applied for one. The assumption out there is that taking out an unsecured loan will simply affect your credit rating while taking out a secured loan will affect more than just a credit rating. Defaults mean that you not only badly affect your credit rating but you also stand a chance of losing your security to your creditor. In light of this, what are some of the risks of taking out a logbook loan?
Unlike traditional loans, logbook loans attract a very high-interest rate. In fact, the average APR for a logbook loan is pegged at 400% which essentially means that a customer can end up repaying more than twice the principal amount. To put this into perspective, let’s assume that you take out a logbook loan of £1,500 with a 78 week repayment period and £55 repaid every week. You will end up repaying a total of £4,250 which translates to an unbelievable £2,750 in interest payments for taking out a loan of £1,500.
The greatest risk about logbook loans has to do with the real possibility of car repossession should a borrower be unable to repay the loan. While most logbook loan lenders insist that car repossession is a measure of last resort, a number of rogue lenders move in to repossess a car after 2 or 3 missed payments. This of course can be a source of great stress and if not checked a borrower can even slide into depression.
The debt collection practices employed by various logbook loan lenders is depressing, to say the least. You miss a payment and you are constantly harassed with phone calls, letters demanding repayment not to mention repo agents that basically repossess your car without providing the borrower ample time to update their accounts.
In light of the above, a borrower should think carefully before applying for a logbook loan and only do so if they are capable of repaying the same.