Disadvantages of a Logbook Loan

Logbook loans may be advantageous in a number of ways but it’s not without its disadvantages either. If you are going to apply for a logbook loan anytime soon, it’s best to understand the disadvantages just as thoroughly as you would the advantages. There are two major disadvantages or risks with logbook loans, which are:

High cost

One of the biggest downsides with logbook loans is the high cost. If traditional secured personal loans only charge 10% or lower in interest rates, logbook loans will cost you multiple times more than that. In fact, logbook loans are highly criticized for its steep interest rates. If we are to talk about the loan’s representative APR (annual percentage rate), it is set at around 400% or sometimes higher.

Why the high cost? It’s because of the high risks involved on your lender’s part. Your bad credit score may not affect your loan’s approval but it does affect your loan’s overall cost. The least attractive your creditworthiness is, the more expensive your loan will be.


Other than the high cost, another disadvantage you need to fully understand is the risk of repossession. To avail a logbook loan, the borrower must be a car owner. This means that your loan is secured against your asset. This is so the risks are lower on your lender’s part. Even if you missed a payment, the lender can always repossess your asset as dictated by the “bill of sale” document.

If you push through with your loan application, it’s important to bear in mind that you may lose your car in the process especially if you can no longer keep up with the monthly payments. Your lender will not repossess your vehicle immediately though. In most cases, you’ll be notified and given enough time to update your payments. If you fail to respond to the debt collector and contact attempts only then repossession will take place.


Though costly and risky, logbook loans are not all bad especially if you need quick cash and you have no other short term financing options. As long as the advantages outweigh the disadvantages for your situation, applying for a logbook loan makes financial sense. Just make sure that you commit to send your payments on time to avoid spiking your loan’s cost and ultimately, to avoid vehicle repossession.