How Risky are Logbook Loans
Though very easy to get approved for, logbook loans come with high risks you need to fully understand if you’re planning to take out a loan. Like with any type of borrowing, it’s imperative to keep in mind that debt has consequences and risks. As borrower, you must be responsible enough to plan your borrowing well to avoid any grave financial complications.
If you’re a vehicle owner and you’re planning to use said vehicle for collateral, there are two major risks you need to think about. One is the cost. While cheaper than some unsecured loans like payday loans, logbook loans are still very costly when compared with traditional personal loans. The average representative APR for logbook loans is 400%. If you want cheap, you’d be better off looking for other types of loans.
Another risk you need to carefully understand is the risk of vehicle repossession. Seeing that your logbook loan is secured against your vehicle, the lender has the right as per the debt agreement to seize your car if you are unable to repay the loan. Repossession, however, is often the last resort for lenders. In case of nonpayment, your lender will send out a debt collector to collect the payments from you. If you are still unable to pay, this is when the lender can repossess the vehicle then sell it to take care of our liabilities.
Considering the cost and risk of vehicle repossession, logbook loans are not always the best option when you have financial emergencies. That doesn’t mean you shouldn’t apply for a logbook loan at all. Though expensive and risky, logbook loans remain a viable option for people with bad credit. But before you go ahead and take out a logbook loan, it’s best to check out other alternatives first. Only if you can’t find any alternative should you consider putting your vehicle at risk.