A logbook loan is a credit line of last resort. Many people only resort to it after all the other avenues are exhausted. The risks involved in taking a logbook loan often push many borrowers deeper into financial turmoil. Despite these risks being known and highly publicized, a lot of people still find themselves sinking deeper into financial trouble after taking logbook loans. This brings us to the question; what are the main reasons that land people in more trouble after taking logbook loans.
Not picking the right logbook loan lender
The logbook loan lender you pick is the main determinant of the success to anticipate during repayment. If the logbook loan company has a very high-interest rate, you will have a huge repayment burden. But the interest rate is not the only thing to look for when picking a logbook loan company. You should also focus on checking the following things;
- Check for a lender with good terms and conditions for the loan
- Only work with the company that does not include unnecessary/hidden charges
- Select the company that has a good reputation in the UK
Drawing a poor credit repayment plan
Once you decide to go for a logbook loan, the greatest mistake one can make is drawing a poor repayment plan. A bad plan will make it difficult to follow with monthly payments and result to defaulting. To draw a good plan, you need to factor the revenue available and focus on clearing all the available debts. If the revenue streams are not enough, you might need to consider areas of austerity in personal lifestyle. Make sure also to factor other personal expenses.
Directing all personal revenue into clearing the loan only
While it is true that some loans such as payday and logbook credits are very risky and require special focus, directing all personal revenue there is a big mistake. Just like an issue arose and forced you to take a logbook loan, there is no guarantee that a new problem will not emerge along the way. Therefore, while the bulk of the revenue should go towards clearing the risky loans, a significant portion should be directed towards creating an emergency fund. If there is no emergency fund, even small issues will force you to get a new logbook loan.
Working on the logbook loan without focusing on improving credit score
The main reason that pushes many UK citizens to borrow from logbook loan dealers is poor credit score. But many are the people who forget about this reality the moment logbook loan cash reaches in their accounts. However, this is very dangerous because you will still be in the same trouble that made you look for logbook book loan.
Once you get a logbook loan, it is important to start crafting a way of raising the credit score. This should start from understanding the causes of poor credit score and starting to address every issue that had lowered the personal score. For example, you need to start building a good credit history, clear the outstanding loans and get the right credit mix.
While the logbook loans have received a very negative publicity, the truth is that you can wade through and emerge a better person financially. Always remember that the key to financial success if good planning. Simply plan well, make some austerity measures, build an emergency fund, and increase the streams of revenue are the initial steps towards financial freedom.