Understanding the Cost of a Logbook Loan

If you have a poor credit score and you need quick cash, one of the financial products you can turn to is a logbook loan. Logbook loans are widely accessible in the UK. You just need to be a vehicle owner and you can easily avail said loan. Considering that loan is secured against your vehicle, you can also borrow larger loan amounts than what unsecured loans can offer.

At first glance, logbook loans are handy solutions to a wide range of financial problems. There’s just one downside. Logbook loans can be quite costly. In fact, the financial product’s high interest rate is one reason why many financial experts are discouraging borrowers from resorting to the loan.

Saying no to accessible loans such as logbook loans, however, is easier said than done. For people with bad credit scores, availability and the promise of quick cash often outweighs the risks. So if you’re seriously considering to taking out a logbook loan, understanding the cost is crucial to your decision-making.

Representative APR

To give borrowers an idea of the loan’s cost, lenders advertise their logbook loans with a representative APR. On average, the representative APRs or logbook loan deals are set at 400%, which is in sync with what many experts claim. Logbook loans are really expensive. Fortunately, there are now providers that offer lower representative APRs thanks to the tighter competition among lenders.

Let’s take for instance logbook loan deals advertised with a 230.7% representative APR. If you plan to borrow £1,000 you intend to repay over 36 months at said APR and the interest rate is flat and fixed per annum at 96%, you will be paying a grand total of £3,879.72. As you can see, the interest rates are hefty because of the high interest rate and the longer repayment term.

In order to ensure that your logbook loan is at its most affordable, you’ll do well to keep in mind to opt for a shorter repayment term. Obviously, you’ll also have to make sure that you find a loan deal with the lowest representative APR. At the same time, it’s worth noting that lenders are also likely to insert hidden fees to your loan. Be sure to read the fine print for more details on hidden loans.

Representative vs. Actual APR

When understanding the cost of a logbook loan, you should also know the difference between representative and actual APRs. As you can understand from the word representative, it’s not the actual APR. It’s just a representative, which means that the actual APR of your logbook loan deal may be different than what was advertised. It can be higher or lower. Either way, you should take your time to find out the actual APR before you close any deal because that’s what will tell you the real cost of your logbook loan. To know more about APR and how it can affect your loan’s cost, Money Saving Expert has an extensive guide for you.