Can A Logbook Loan Make You A Better Financial Manager?

Many people believe that going for a logbook loan is the lowest point that they can sink in their lives. Experts advise people to only use logbook loans as the option of last resort. However, the fast growth of the numbers taking logbook loans in the UK is worrying. Even with the high APR (annual percentage rate), extensive risks, and dangers of having the car recovered, can anything good come from the logbook loans? There is a silver lining in this precarious situation. Here is a closer look at Robert Johansen situation that made him emerge a better financial manager.

How Robert ended up with very poor credit score and sought a logbook loan

During the summer of 2015, Robert Johansen took a logbook loan because his credit score was very poor. The poor credit rating had come about from overspending on his credit card and defaulting two bank loans when his daughter fell ill. As a college teacher, all his resources were directed to handling his daughter which meant defaulting on the mortgage and even personal utility bills. Things ran from bad to worse within six months.

With only his car left as the most valuable asset, Robert saw no other alternative but to get a logbook loan. However, he sought advice from a financial expert early enough after borrowing the logbook loan. This is what made Robert emerge as a better person, create new streams of revenue, and march to financial freedom. Here are some great things that can come from a logbook loan.

Learning how to budget and applying the skills in other areas of personal finance

Perhaps the most important thing that one can learn from logbook loans is budgeting. Because there are other loans, credits, and personal expenses to be met, one has to learn about budgeting. If you seek assistance from a financial expert, he will assist you to classify different expenses and direct the resources to those that are more important. When these skills are applied in other areas of personal life, you will emerge from the logbook loan and other debts a better person.

Appreciating the role of experts when handling subjects from areas outside your jurisdiction

If you are not an expert in a specific field of specialization, the best thing is seeking assistance from experts in that area. This philosophy comes out very well when one is handling a logbook loan. Though you might be in nursing, hospitality, education, or engineering among other areas, it becomes easy to appreciate that finances is a different field altogether.

In Robert’s situation, the financial expert came in handy to help him appreciate the importance of good financial planning. He was able to acknowledge the sources of finances and how to spread the resources to cover all the expenses while meeting the loan obligations. You should never make the mistake of allocating the entire salary to repaying the loan only without catering for all personal expenses such as rent and transport costs.

Acknowledging the challenges that lay ahead in quest reach financial freedom

The main road to financial freedom is marred with numerous challenges. However, you can easily overcome them after successfully addressing logbook loans. Robert understood the dangers that come with poor credit score. This appreciation makes people work harder to ensure they are in good terms with lending institutions that have lower rates.

Robert further appreciated the importance of having several streams of revenue. If one fails, there is always a fall back plan to prevent you rushing to high interest and high-risk sources of funds. Think of running a blog, opening a business for other members of the family, and working on a part-time basis after work.

 

Five Things That Can Make a Logbook Loan Sink You Deeper Into Financial Trouble

Once you decide to go for a logbook loan, it is important to appreciate the risks that lay ahead. In many cases, it is considered the credit of last resort because most financial institutions have declined loan applications. Like financial experts point, the logbook loan should only be used with a lot of caution. In this post, we look at five key things that can make you sink deeper into financial trouble after taking a logbook loan.

Prioritizing payment of other less risky loans while giving less focus to the logbook loan

The moment the lender approves your logbook loan, it is important to appreciate that a lot of dangers lay ahead. Because you have already given away the car documents, the risk of losing it becomes real. Failing to prioritize the logbook loan when repaying other bills can only worsen your present credit situation. While other debts need to be cleared as fast as possible, those that do not come with a lot of threats can wait until the riskier logbook loan is cleared. For example, the student loan can wait for a couple of months because it does not attract any interest and no collateral is attached to it.

Taking the maximum that the lender has to offer as opposed to what you need

For many people who have been declined loans by banks, a chance to borrow looks God sent. However, this is a trap that makes most people to nosedive into the sea of trouble within no time. Even if the lender is willing to offer £30,000, but you only need £2,000, consider going for what is needed only.

A bigger logbook loan means that you will repay for a longer time with higher interest rate. Repaying a lot of cash every month for a long time is bound to cause fatigue and raise the chances of defaulting.

Hiding from the lender when meeting monthly payment becomes difficult

If you realize that the sources of revenue are having issues and meeting the monthly repayment is becoming difficult, running away will only worsen the situation. The loan will accrue a lot of interest, and the lender will start looking for the car to recover the money. Instead of running away, it is advisable to visit the lender and tell him what you are going through. Though some additional interest might be incurred, some good lenders will even allow you to readjust the repayment amount for a few months until your issues are resolved.

Failing to relook at personal spending and reworking on the budget

Financial experts in the UK and banking institutions have found that many people get into trouble with personal finance because of poor budgeting. This problem can make things worse by drawing you deeper into the turmoil of debt.

After getting a logbook loan, it is important to relook at your budget from a different angle to help release some cash. If you find it difficult to achieve this alone, make sure to seek help from a financial expert. A good budget will help you to look at personal finances from a long-term perspective.

Looking at the logbook loan in isolation

Personal finance is not about the logbook loan only. To reach financial freedom, it is important to have a bigger picture and factor the loan in the budget. If you look at the logbook loan in isolation, the chances of sliding back into the situation you are in are very high. When drawing a financial strategy, experts advise clients to look beyond the logbook loan and other credits. For example, the austerity measures you adopt should be implemented to help clear the loan, build an emergency fund, finance personal businesses, and create new lines of revenue.