6 Deadly Sins When Taking a Logbook Loan

We all make mistakes. Big or small, they are still mistakes. While mistakes are inevitable in life - they can make you learn, grow, and improve. But losing money in the process is not what anyone wishes for.

When it comes to logbook loans, a small mistake can cost you a lot. The whole process - from shopping for the loan to applying to signing the agreements is a little complex, with pitfalls that if not noticed, could potentially lose money. 

Does that worry you? Well, fear not. If you're considering taking out a logbook loan, learning from others' mistakes could save you a lot of money in the long run.

This article will analyze seven of the most common mistakes you can make while applying for a logbook loan and give you some go-to tips and tricks that will help you avoid them.

Not Doing Enough Research

When it comes to logbook loans, there is nothing like ‘one fits all.’ So if you do not do enough research to find one that best fits your needs, you will be doing yourself a great injustice. 

There are lots of logbook loan deals in the market today. Taking the first offer that comes your way without comparing with others can be a big mistake.  

So, before you settle on a lender, first, don your investigator cap and get as much information as possible.

A little homework can go a long way in saving you money. 

Not Comparing All Available Loan Offers Before Applying

Even after you have done thorough research, requesting quotations from multiple lenders can help you compare the available options and help you find the best deal for your situation.

Take the time to compare loan amounts, terms, interest rates, and other fees, such as registration fees, late payment penalties, etc. This gives you a chance to have options. If one lender doesn’t meet your requirements, you can check out other offers to see which fits you best. 

Thankfully, we have simplified the process for you. On Money254, you can compare each of the logbook loans available to you on interest rates, fees, including disbursement and processing fees, interest rate structure (flat or reducing balance), maximum and minimum tenure, and any other bespoke eligibility requirements.

Visit our logbook loan comparisons page to view, compare and choose a logbook loan that matches your needs.

Also read: Logbook Loan Fees and Terms; All You Need to Know

Borrowing more than you need

Money is tempting. For example, it may take a great deal of discipline not to apply for Ksh100,000 when you only need Ksh50,000 for a medical emergency. After all, the lender is offering more, and you are not sure what will happen in the future. 

However, as tempting as it might be, remember that the loan will need to be paid back. It is not free money. And in addition to repaying the principal, a higher amount means a higher cost of credit in terms of interest and other fees. 

Hence, you should not borrow a larger amount just because you can. As mentioned above, you should consider your repayment capabilities before anything else. It is wiser to take just a small amount of loan that covers the expense you want to fund instead of taking a hefty loan and risk getting into default.

Not Considering Your Current Income and Ability to Pay

Before even considering taking out any type of loan, you should ask yourself is, ‘how will I pay back this loan?’ If you are not 100% sure how you will make payments, think twice before sending in that application.

This is especially important for a logbook loan since your vehicle is directly on the line. And even if it wasn’t the vehicle, defaulting on a loan has many consequences, including damage to your credit score.

Don't take the loan while banking on your income increasing later. This could lead to severe financial trouble. Before borrowing, always make plans to ensure that you are able to pay back the loan comfortably. 

Also read: Are You Stuck in a Debt Cycle? Here Are 6 Tips to Help You Break Away

Signing the Loan Documents Without Reading the Terms and Conditions

Before you put your name on the dotted line, you need to fully understand: 

• The rates and charges, including charges such as late repayment penalties. 
• The monthly payment (amounts, deadlines, etc.)
• Whether your installments could increase, how often it could increase, and what could trigger its rise.
• Whether you could pay up the loan early and if there are any consequences to that. 
• The loan tenure.
• The total interest amount. 

If you don’t read and fully understand the loan agreement, you could get a loan that might end up becoming unaffordable or that ends up becoming a financial burden down the road. 

So before you sign any loan documents, ensure you fully understand what you are getting yourself into. Read the fine print. If you are unsure, you can get the help of a lawyer/credit professional to help decipher the loan agreement for you. 

Also read: Predatory Lending in Kenya: Don’t Be a Victim

Forgetting to Make Repayments on Time

The loan process doesn’t end once you sign the agreement. In fact, the actual journey starts right after. You need to pay back the loan in full or by making timely installments. This might sound too simple, but you will be surprised how often people forget to make the payments-especially if this is your first loan. 

While it might be a genuine mistake (people forget all the time), missed payments can bring forth severe consequences. At the very worst, it can end up costing you your vehicle. 

To avoid this, put a repayment plan in place. Schedule calendar reminders on your device or simply schedule an automatic payment with your bank. This will ensure that you don’t miss any payment.

WRAPPING UP

Here’s the truth. We all make mistakes, and they are a part of our everyday life. However, some mistakes can be prevented with a bit of prior planning and preparation, especially regarding money. 

So when it comes to logbook loans, a little bit of research and other preparation tips mentioned above can easily make your application and repayment effortless and pain-free. 

Our logbook loan comparisons page should be your first stop if you consider a logbook loan. We have done most of the work for you. You only need to log in to shop for some of the best logbook lenders in the country today.