Are there any risks related to logbook loans?

No doubt, logbook loans have had a positive impact on the lives of many individuals with a poor credit rating. The fact that individuals donít have to worry about the state of their credit score is something that has without a doubt made logbook loans very popular in this time and age. The requirements are pretty simple and the application process simple making it one of the best bad credit loan products for those suffering from a poor credit rating. Add to that the fact that it accords individuals with a poor credit rating an opportunity to change the state of their credit history over time is something that most people find irresistible about logbook loans.

However, with all its benefits, there are also risks that are associated or rather related to logbook loans. In as much as logbook loans are easily accessible, there is also the risk of high-interest rates which if not checked will leave you in heavy debt and further taint your already tattered credit rating. To put it into perspective, the average APR for a logbook loan is around 400%. This is just the average APR and itís not uncommon to find unscrupulous dealers that charge even higher interest rates than the average rate. What happens in this case, is that you end up paying more than twice the principal amount.

If you are not careful and if you donít plan financially well, chances of getting into a debt rut are very high. In fact, this is one of the reasons as to why it is encouraged for you to do due diligence prior to applying for a V5 loan. Donít just apply with any lender. Check how reputable they are, how they deal with a missed payment or two and how affordable their logbook loan products are.

The second common risk of logbook loans has to do with harassment calls. There are some lenders who never give you peace of mind the moment you miss a payment. You will get tons of messages in a day and harassment calls threatening you of action if you donít pay up. Of course, this is the last thing that anyone would wish to happen to them. You find yourself living on the edge, always wondering if the next phone call is from your lender.

The third and most feared risk is, of course, the risk of car repossession. You see, when you apply for a logbook loan, the ownership of your car is transferred to the lender which means that they can legally repossess it and sell it to recover any outstanding money you havenít paid. While genuine lenders donít rush to repossess your car once you face financial constraints but rather work out a formula to enable you to make payments, unscrupulous ones will rush to repossess your car if you miss just one payment.

All these risks are real and the very reason why some people are wary of logbook loans. However, if you do due diligence and keep your end part of the bargain, logbook loans are indeed beneficial!