When all the financial institutions turn down your application for a loan, one of the alternatives is a logbook loan. The logbook loan companies are willing to lend you as far as you can proof ability to repay and ownership of the car. While they are fast and will not consider the credit score, you are plunged into a pool of numerous risks. In you make a mistake such as defaulting on repayment agreement; the car will be towed away and sold to recover the cash. Here are the most dangerous pitfalls to avoid when taking a logbook loan.

Picking any lender in the market

In the UK, there are numerous logbook loan companies. However, picking the first one that comes up in the search results will be a grave mistake. You must be careful to avoid lenders with very high-interest rates and rush to repossess your car. The best lender should be willing to work with you throughout the repayment session and handling any issue that may arise. For example, if the borrower’s salary gets late with a week because of unavoidable circumstances, a good lender should understand.

Signing the loan without reading all the requirements

In most of the cases, the terms and conditions of a loan are outlined in the lender’s agreement. If you fail to read through the agreement well, the chances are that some things will get you off guard. For example, a lender might have included very punitive clauses such as repossessing the car within a few days of first repayment default. In such a situation there is no room left for renegotiation.

It is very important that you read and reread through the agreement before appending your signature. If you notice a punitive clause, insist it gets deleted or redone.

Taking more than you need

From simple calculations about logbook loans; the more you take, the more you will pay. The secret to repaying as little as possible is ensuring you borrow less (only what you need). If you need £470 for a medical emergency, do not go for £4000 because the lender is willing.

With a bigger loan, you will need to repay for a longer period which could expose you to other related risks. For example, if you took £4000 and committed to repaying in 24 months, issues such as emergencies will always emerge. You could sink deeper into trouble and find it harder to repay the loan. As opposed to taking the maximum being offered by the logbook lender, consider taking the minimum and focus on rebuilding the credit history. If an emergency requires you to take some loan, the banks will not turn you away because the credit score has improved.

Failing to install a credit repayment plan

In most of the cases, people who go for logbook loans have other loans they need to service. Therefore, the logbook loan is another credit that will add to the headache of repayment. Now, as you consider signing that logbook loan, it will be a big mistake not to draw a repayment plan. For example; do you have a credit card loan, another bank loan, mortgage, insurance loan and others?

Experts advise their clients to consider using plans that prioritize the riskiest loans. For example, you should consider meeting the least amount of all other loans repayment and direct the extra cash to clear the logbook loan. This is because the loan attracts very high-interest rates and you could easily lose the car. If you are finding it difficult to draw an appropriate plan, it is advisable to consider seeking help from a financial expert.