Trouble a Step Away: A Personal Account of Five Things That Can Cause You Serious Problems with Logbook Loans

Borrowing from a bank is the primary option for accessing credit. However, many people end up getting declined because they have a very poor credit score or lack a constant source of income to proof they can repay the loan they are seeking. In summer last year, when I applied for a bank loan, my credit score had hit an all-time low because the mortgage, credit card, and a few bills repayments had fallen behind schedule.

The reality that I could not get funds made me to start looking for an alternative immediately. However, I fell into trouble with the logbook loans because of the following five things.

(1) Looking for a logbook loan dealer in a hurry

Just like many people do after getting bank loans declined, I rushed to the nearest logbook lender. This was a grave mistake that I came to regret later. The lender I picked had a very high APR 395%.  Besides, the lender had very bad debt collection procedures and was known for hasty repossession of cars within a few months of default.

It is very important to look for a good lender who has a good history, offers lower interest rates, and remains flexible during the loan repayment period.

(2)Borrowing the maximum that was being offered

Because the bank had declined my loan request, I was still angry when searching for an alternative. Therefore, I went for the maximum that the logbook loan dealer was offering as opposed to what I needed. While I only wanted £1650 for a medical emergency, I borrowed £7100 because the lender was willing to give the money.

I failed to appreciate that the more I borrowed, the higher the repayment interest over a longer period. The long drag caused fatigue, and I ended up defaulting after only 16 months.

(3) Not drawing a credit repayment strategy

Immediately you get a logbook loan; the first thing is drawing a good repayment strategy. This strategy should prioritize high-risk loans to avoid getting stiff penalties. Instead of allocating more money towards the logbook loan, I continued focusing on the credit card loan and student loans. While they are still loans that needed to be repaid, going slow on them would only accrue some interest, but no collateral was at stake.

(4) Hiding from the lender after falling behind the repayment schedule

The moment you notice that things are not working your way after taking a logbook loan, it is important to take drastic measures to prevent everything falling apart. In my situation, I went into hiding. I left my house and rented an apartment downtown London. However, the lender kept looking for the car and finally caught up with me in one of the shopping malls. Without even asking the owner of the car, I entered into the mall only to come out and get my car being tied to a recovery truck. No effort to persuade them would deter their actions.

How I got out of trouble

Realizing that everything had finally crumbled, I rushed to a friend who had started a new practice in financial advisory. Upon listening to my story, he lamented that it was very late to rush for help but offered to help anyway. Here were his recommendations that did not just help me address the logbook problem, but also enabled me to march to financial freedom.

  • We drew a credit repayment model that prioritized the logbook loan
  • I agreed to use him as by credit management expert
  • He reached the logbook loan dealer, offered to clear the amount I defaulted, and follow the previously agreed schedule
  • Took serious austerity measures that included riding and not driving to work (all the released cash was directed to repaying the loan)
  • Started working on improving credit score to make me eligible for lower interest loans in future