Should You Apply for a Logbook Loan?

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Logbook loans are very popular in the UK today for a number of reasons but the most important of which is the fact that the financial product does not require any credit check. If you’ve been having problems availing a personal loan because your bad credit score kept getting in the way, a suitable logbook loan offers an ideal quick fix solution to your problem. With the high risks involved with a logbook loan, however, the question begs to be asked. Should you apply for a logbook loan?

If you’re thinking of securing your next personal loan against your vehicle, there are risks to think about. One such risk is the high cost. Logbook loans are often advertised with high representative APRs. The current average in the market is 400%. Sometimes providers charge more, sometimes it may cost less. Either way, logbook loans are still pretty expensive especially in comparison with traditional personal loans.

To illustrate, let’s say you want to borrow £850 over an 18-month repayment term. If the representative APR is 450.05% and the interest rate is 132% fixed and flat per annum, you’ll be paying a grand total of £2,533 by the end of the term. On a monthly basis, you’ll be paying around £140.7 per month. As you can see, the cost of the loan features a high interest rate that’s more than the principal.

For the high cost alone, logbook loans are indeed very risky. But other than the high interest rate, there’s also the risk of vehicle repossession to think about. Because the loan requires your vehicle to be your collateral, your lender has the right as per your loan’s terms to repossess your vehicle. This is usually carried out when the borrower is unable to repay the loan for several months. If you continue to fail to response to your lender’s reprimands, this is when lenders recover your vehicle, which they can then sell to cover for your outstanding balance.