The Cost and Risks of Logbook Loans

When it comes to finding quick ways to raise funds, logbook loans are among the most convenient to avail. The product is available on the Internet and in the high street making it a viable option for people with bad credit. But while it's highly accessible, there are other important factors such as cost and risks that you need to consider before finalizing your decision.

Understanding the Cost

Logbook loans are getting some flak from financial pundits for its high cost. Just like payday loans, the financial product tends to come with extremely high interest rates. On average, the Representative APR is 400% but could be more or less. This has caused raised eyebrows among experts. Is the promise of quick cash worth all that interest?
To get a better picture of the cost, let's say you want to borrow £1,000 at a term of 12 months. If the Representative APR is 300% and the annual interest rate is fixed at 96%, your monthly repayment dues will come down to about £163 per month totaling to about £1,960 by end of term.
As you can see, the interest you’ll have to pay is £960, close enough to the principal amount you intended to borrow.

Getting Acquainted with the Risks

Logbook loans are short-term personal loans secured against your car. As discussed above, one of the risks is the high cost of the financial product. Another huge risk attached to logbook loans is car repossession.
When approved for a logbook loan, your car remains with you but the logbook or V5 document is handed over to your lender. Also part of the deal is you signing the bill of sale and debt agreement. In the event that you fail to meet the terms and conditions of the loan, there is a high likelihood that your lender will repossess your car to cover for your outstanding balance. At this point, you can still make repayment arrangements with your lender. The downside is that there may be added charges and fees due to the delayed repayments. If you can’t still keep up with repayments, repossession is the last course of action for lenders. They will also need to sell the car and ask you to pay for the balance not covered by the sale.

Are Logbook Loans Worth Considering?

With the financial product’s high cost and risks, it seems that you are better off checking out other loan alternatives. That’s certainly true especially because alternatives are cheaper though not as accessible and convenient as logbook loans. You can’t, however, say that logbook loans are not at all worth considering. Sometimes, there are instances when you are left with no choice but take advantage of what’s available. And that’s what logbook loans are for. They are last resort solutions to pressing financial problems that require immediate action.