Five Hard Questions That You Must Ask Yourself before Taking a Logbook Loan
Every financial expert out there will advise you to stay away from logbook loans at all costs. The loans are expensive, and the risks involved raise the chances of plunging you deeper into financial turmoil. However, to agree with Money Advice Service, a logbook loan should be the option of last resort. Whether it is an emergency or any other reason for taking a logbook loan, here are five hard questions to ask.
Is there another option apart from the logbook loan?
For many people, being declined for a bank loan blinds them from other options. Take a pen and be genuine to yourself to identify all other avenues. For example, as opposed to taking a logbook loan with an interest rate of up to 400% APR, why not consider these options:
- Borrowing from your friends.
- If your credit score is very poor and banks are turning you away, why not use the car as collateral. The banks will soften their stand because of the collateral.
- Focus on areas of austerity to raise the cash you want. Think of cutting the 2 holidays/three months to only one in a year. You can also consider using public transport and leave the car home to save on fuel costs.
- Think of selling the car at full value and buy a cheaper one. The remaining cash should be directed to your current need.
What plan do I have for repaying the loan and other debts?
As you decide to go for the loan, ensure to also draw a good plan for repayment. This will make it easy to follow regular monthly payments. A good plan will not only focus on clearing the logbook loan but also moving out of debt.
How prepared is my family for any eventuality?
The moment you sign for the logbook loan, the focus shifts to repayment. However, the risk of having the car recovered in case of default remains very high. It is important to have the entire family well prepared for life without the family car.
Do I have any legal redress on my hands in case things go wrong?
In the UK, signing the bill of sale is the same as transferring the ownership to the lender until the car is fully cleared. Make sure to understand all the legal options at hand in case things get difficult along the way. Once the agreement between you and the lender is registered in court, the car can be repossessed and auctioned to recover the cash. In fact, even filing for bankruptcy will not stop the lender from recovering the car in case of default.
How can I match to financial freedom starting from now?
Sinking to the point of seeking a logbook loan means that your financial status is wanting. Your credit score is poor, and no bank is willing to lend you. In fact, things do not stop there. No phone company, insurance, mortgage or another form of lender will be willing to work with you because of the high risk involved.
You must be clear on how to match to financial freedom. You can start by working with a financial expert to draw a debt recovery plan, craft a method of improving the credit score, and increasing streams of revenue. The plan will involve sharpening your budgeting skills to ensure all the expenses are met, promoting saving, and setting aside cash for an emergency.