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Logbook Loan Advantages vs. Disadvantages

If you have bad credit and you've been denied a loan from banks, a logbook loan is a viable alternative. If you need money quick and doesn't have ample time to go through days of loan processing, again, getting a logbook loan makes perfect sense. As long as you are of legal age and a resident of UK with a car registered under your name, you can consider a logbook loan a great alternative for your monetary needs.

But like any responsible borrower, you need to do your own research and understand how logbook loans really work before getting one. Remember that there are consequences and interest rates to deal with when borrowing money. The only way to avoid them is to know exactly what you are getting into. And what better way to do that than by weighing the advantages and disadvantages.

What are the advantages?

1. Fast Approval

One of the reasons why logbook loans are making waves in UK is the fast approval and processing. If you're really need money quick, getting a logbook loan is your best bet as most lenders are now offering same day approval. This means you can apply and receive the money within the same day.

2. Widely Available

Another plus for the product is its availability. With so many lenders setting up their own online portals, you can now apply from the comforts of your home and wait for approval within hours.

3. No Credit Check

For people dealing with bad credit woes, logbook loans are perfect seeing that most lenders do not conduct credit checks anymore. With logbook loans, it doesn't matter if you have the worst credit score. As long as you meet the requirements, you can almost always expect to get approved.

What are the disadvantages?

1. High APR

Despite ease of application, fast approval and availability, however, logbook loans have been criticized for having very high interest rates. The average APR in the market is about 400% though sometimes it can be higher than that. Compared with traditional loans, it's definitely more expensive which is why financial experts recommended steering clear from the product as much as you can.

To compare logbook loan deals and lenders according to APR, click here and see if you can find a lender with a lower APR than 400%.

2. Repossession

More than the high interest rate, the greater risk you'll be taking when borrowing a logbook loan is car repossession. Since the loan is secured against said asset, lenders can repossess your car as per agreement in the event that you fail to meet your obligations as a borrower.

3. Debt Trap

Then there's also the lure of easy money. Because logbook loans provide fast cash, some people are tempted to borrow even if they don't really have to. This can lead to a debt trap where you keep renewing the loan even if it's not needed anymore. Eventually, you'll end up paying more than what you bargained for.