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Understanding the Cost of Logbook Loans

There's no denying the fact that logbook loans are highly demanded in UK's lending industry today. This is no surprise at all seeing that the financial product is easy to avail and requires no credit check. But while it has its many pluses, it is also highly controversial for its high cost.

For first time borrowers and even those who've already tried the financial product, it's very important to understand the cost of the loan to know if you're getting a good deal or just burying yourself into more debt.

Defining APR

When considering the cost of a logbook loan, the most important factor to closely look into is the annual percentage rate (APR). Understanding APR is the best way to gauge the real cost of the loan as it represents the actual yearly cost including all charges and other fees.

For logbook loans, the APR is at about 400% on average. It can be lower or higher depending on your lender. Since it represents the actual cost of the loan, borrowers should look for lenders offering the lowest APR.

If you check comparison sites and compare top lenders in UK, the one with the lowest APR as of the moment is The Car Loan Centre at with a Representative APR of 122.49%.

Understanding Representative APR

When lenders advertise their logbook loan offers, they use Representative APRs instead of the actual ones. If they say the APR is 150% that's not the actual APR that you'll get. The actual cost can be higher or lower and as the borrower, it is your responsibility to inquire about the real cost so you'll know how much exactly is the interest rate and your monthly due.

A Closer Look at APR

To illustrate the cost of a logbook loan, let's take a look at this example. Let's say you want to borrow 800 for medical expenses and overdue bills. You're planning to repay the loan over 18 months with the interest rate fixed at 132% p.a. If the APR is 464.4%, you will end up paying 134 per month which will total to about 2,413 at the end of the term.

As you can see, the interest rate is pretty steep for a 800 loan. Despite the high cost, however, logbook loans remain a good option for quick cash needs. Yes, the cost is pretty high but at the end of the day, it's all about convenience and you paying on time to avoid complications.