How much does a logbook loan cost?
One of the main reasons for the controversies about logbook loans is the steep cost. If you’re applying for a logbook loan and you’re having second thoughts, it’s best to get to the root of the problem. Find out about the cost and decide whether it’s too much for your situation or not. To help you understand how much a logbook loan really costs here is a quick guide.
Representative APR vs. Actual APR
Logbook loan deals are advertised with a representative APR, which basically gives you an idea about the loan’s cost on a yearly basis. The average representative APR for logbook loans is 400%. When shopping for a logbook loan deal, it’s important to remember that what was advertised is just the representative. The actual APR can vary from the rep APR but only slightly.
Understanding the cost
To illustrate how much a logbook loan can cost, let’s say you wish to borrow £850 over an 18-month repayment period. If the representative APR is 450% at a flat rate of 132% per annum then you’ll end up paying a whopping total of £2,533 by the end of the loan term. That amounts to about £140.72 per month.
Thankfully, more lenders are now offering cheaper logbook loan deals. If you’re thorough and careful, you may find deals with representative APS half of the market average. To see the difference in the cost, let’s say you want to borrow £1,000 over an 18-month period. If the representative APR is 180% at a flat rate of 70% per annum, you’ll end paying a total of £2,050 for the loan or that’s about £113.89 per month.
In either case, the cost is still steep but you can see the difference in terms of APR. To make sure your loan is cheaper than the usual, look for a deal with a lower APR. Click here in case you want to know more about APR and how it affects your loan’s cost.