Evaluating the Costs and Risks of Logbook Loans

Just like with any type of loans, logbook loans come with costs and risks that every borrower should be aware of. Borrowing money, while convenient, can be costly due to interest rates. In the case of a logbook loan, there is the risk of losing the vehicle since the money is secured against it.
To ensure that you know what you’re getting into, evaluating the risks and costs will help you borrow modestly and stick with your obligations to avoid the consequences.

The Real Cost of Logbook Loans

While logbook loans are easy to avail, you need to borrow responsibly and with caution. Unlike conventional personal loans from banks, lenders generally charge higher interest rates to offset the risks they are taking.
Depending on the company, the APR is typically around 400% or sometimes higher. It can be charged weekly or monthly and is usually included in your monthly repayments. You can ask your lender to do the computations for you so you'll have a better picture of how it is charged and how much interest you are paying in total.
Also keep in mind that APRs as advertised by lenders are just the Representative APR which means it is not the exact interest rate. To know the exact cost of the loan, again, you'll have to ask your lender.
If you want to do your own computations, you can do so using the loan calculator at The Guardian.

The Risks Involved with Logbook Loans

When borrowing money especially in the form of a secured loan, you'll have to be prepared for the risks. For the case of a logbook loan, your greatest risk is losing your vehicle due to failure to make repayments or default.
Since the interest rates are higher compared with conventional secured loans, you might find yourself in deeper debt and struggling to keep up with your dues. If this happens, you can always try speaking with your lender to set-up arrangements. Otherwise, they may be forced to take action. Either they will hire a debt collector or they may need to employ the last resort which is to repossess your car.
After repossession, most lenders would give you a grace period to settle your debt including the repossession fees. If you can't still manage that, they will move forward with selling the vehicle as payment for the loan.

 

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