What are the risks of logbook loans?

Granted, logbook loans have been a savior of sorts, a relief to the thousands of UK individuals who before couldn’t avail a loan because of their credit score. The popularity of logbook loans spread like a bush fire. When they were availed, those with a poor credit rating finally had a reprieve. They now could apply and get approved without their credit score rearing its ugly head. In spite of the many benefits that come with applying for a logbook loan, the truth of the matter is that there exists risks that come with applying for a logbook loan. What are the risks?

Risk of repossession

While the logbook loan lender does not take your car into possession on approving your loan, it takes your car logbook into possession. You continue to use your car on a day to day basis as you make repayments for your loan. However, should you default or be unable to meet your debt obligation over a couple of months, the logbook loan lender has the legal right to repossess your car and sell it to recap their money. Of course, this might be a bitter pill to swallow and the pain of losing your car might be difficult to come to terms with. However, failure to meet your debt obligation means that you will lose possession of your car.

Legal action

There are certain cases where the proceeds from the sale of your car might not be able to fully cover the principal amount of the loan together with the interest due. When this happens, a logbook loan lender might take legal action and sue the borrower in order to recoup the deficit. What this essentially means is that should your car be repossessed and sold and the proceeds are not sufficient, a UK logbook loan lender can take you to court with the sole intention of forcing you to pay the deficit.

Worsening credit score

Defaulting on logbook loans could only mean one thing – your credit score will suffer a beating. You need to apply for a logbook loan with the sole aim of improving your credit score. However, failure to meet your debt obligation means that your credit score will end up being worse hence making it difficult for you to get favorable loan terms in the future.

In light of the above, it is important that you make payments for your logbook loans without fail monthly so that you do not have to contend with the above mentioned risks.