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What You Need To Know About Logbook Loans in the UK
When managing your debt, it is important to do something before your issues escalate into something more serious. While you may be tempted to just ignore your mounting balance, you’ll find that there are alternatives that you can consider that might help you avoid an even more serious financial trouble in the process.
One such option is debt consolidation. This is where you take out a loan to pay off all of your existing debts. This could be small loans or credit card balances that are charged separate interest rates. It's considered a more manageable and affordable way of managing your finances and regaining control of it in the process.
Benefits of Using Logbook Loans for Debt Consolidation
When you take out a debt consolidation loan, you are charged with a fixed interest rate. You’ll also get the benefit of a fixed payment schedule every month for the entirety of the loan term. This means that you’ll know exactly how much you’ll pay every month and when you’re supposed to make them. The interest rate will remain the same all throughout the loan term.
There will be one single payment to make monthly. Keeping track of your loan repayments become easier when you do not have to worry about different due dates or different amount dues. It would be even better if you can find a lender for debt consolidation loans that will allow you to pay off the debt on a term of your preference as this will allow you to manage your finances more effectively.
Since there is only one payment to keep track of, you are confident that you will not miss it out. Late payments can have a huge impact on your credit score and your borrowing rate in the future. So, consolidating your loan makes immense sense to gain better control of your finances.
Factors to consider before consolidating your debts
When combining different debts into a single repayment, there’s a good chance you may have a longer repayment term to make the monthly payments more manageable for you. However, be aware that when you have a longer loan term, you are charged more interest-wise. So, find out ahead of time what the interest rates are before you finalise the loan agreement. Debt consolidation only works if the interest rate you’re paying for the consolidated debt is lower when compared to the combined interest for all your existing ones.
Logbook loans may not always be the first choice that people pick when borrowing. However, many of those that do turn to them are borrowers with poor credit history or those that need emergency finance boost but could not secure a loan anywhere else. If you are considering the possibility of turning to these loans, you will generally wonder what impact it might have on your credit score.
Logbook Loans and how they work
Logbook loan lenders do not usually perform credit checks. Their monthly income requirements tend to fall to the minimum as well and in most cases, will only require borrowers to have a valid bank account for the instant approval that most of them provide. This alone makes them quite an attractive option for borrowers that are cash-strapped.
This is where the trap lies, however. For desperate borrowers, it is easy to convince themselves that they can pay the loan and the interest rate come their next payday. However, if you have borrowed more, this means you already have a smaller amount on your next payday to begin with. This has a potential to lead you into a debt cycle.
Logbook loans and your credit
Generally, payday loan activity will not show up on credit reports. At some point though, some agencies involved in credit reporting might pick up your history with these types of loans. This could lead lenders to get access to this information and this could have an impact on your loan approvals in the future.
Also, if you do not repay the payday loan, it can get sent to a collection agency which could then report the account to national credit bureaus. This could have a huge impact on your credit score. Payday loans can cause your paycheques to come in smaller amount since you do not just pay what you borrowed, you have to pay for the fees attached to the loan as well. This makes it a huge challenge to get them paid back on time especially if you will consider the fact that you’ll have other monthly expenses and bills to cover as well. In addition, every time you pay the lenders late, you incur even more fees.
Positive impact of Logbook Loans
You can, however, use payday loans to impact your borrowing chances in the future. If you take the necessary effort to get a payday loan paid on time, you can use this to show evidence to future lenders that you are responsible with your finances. Paying it on schedule and in full will boost your credit score. To do this though, you'll need to borrow just the right amount that you know you can conveniently pay back come the due date.
So, if you can, try to only take out a payday loan when you most need it and when you are sure that you can pay it back on time.