With so many people struggling with bad credit, it's no surprise why logbook loans have been gaining popularity over the years. If you need quick cash and you have bad credit, logbook loans come handy for a wide variety of financial emergencies.
While easily accessible and super fast to avail, logbook loans can be costly. In fact, many experts advise borrowers to steer clear from the loan, if possible, because of the underlying risks. To understand how risks logbook loans can be, there are two key factors you need to look at. They are the interest rates and the risk of repossession.
Logbook loans, in general, are known to have steep interest rates. The average representative APR for the product is a whopping 400%. That already includes the interest rates, related charges and other fees. Fortunately, stiff competition among lenders has pushed the APR lower than the usual400%. There are now lenders offering logbook loans at APR 300%, 200% and lower. If you want the cheapest deals, your job is to scout the market for deals with the most competitive APRs.
To illustrate how a logbook loan may cost, let's say you want to borrow £1,000 to be repaid in over 18 months. If the APR is 180% at a fixed flat interest rate per annum of 70%, your loan will cost £113.89 per month or £2,050 in total. That means the total amount you paid in interest and other charges totals to £1,050.
The other factor that amped up the loan product’s risk factor is the consequence of vehicle repossession in the event that you are unable to pay for the logbook loan. One of the most important stipulations of any logbook loan is the element of security wherein you use your car as collateral in order to avail the quick case. In essence, you take all the risks while the lender has temporary ownership of your car they can use to recoup their losses if you default on the loan.
Taking into account the interest rate and repossession, logbook loans indeed are quite risky. But that doesn’t mean they don’t come handy when financial emergencies arise. If the situation warrants the need for a logbook loan, just remember the high risks and use that as motivation to always repay your loan on time. Click here for more guidelines that might help when you’re in the market for a loan.