Understanding the Cost of Logbook Loans

If you want to know the true cost of a logbook loan, look no further than investigating the representative APR. APR, which stands for annual percentage rate, is the financial concept lenders use to make it easier for customers to compare deals.

In general, the lower the APR, the better the loan is in terms of cost. A low APR means that the loan's total yearly cost is better than deals with higher APR. You have to remember, however, that lenders only advertise representative APRs. As per the name, it is not the actual interest, only a representative of what you may avail once approved.

In any case, let's try to illustrate how APR works. Let's say you found a logbook loan with representative APR of 180%. If you wish to borrow £1,000 at a flat rate of 70% p.a. and you want to repay the loan in 18 months, you will end up paying £113.89 per month or a total of £2,050 in total. That means you paid £1,050 in interest, charges and other related fees, which is £50 more than the principal amount.


As you can see, logbook loans are very costly. Its high cost is also the very reason why many financial experts discourage borrowers from logbook loans. Despite the high interest rate and hefty fees, logbook loans remain a viable option if only for its accessibility and no credit check requirement.


If you have no other choice but to resort to a logbook loan, the trick is to find lenders that offer deals with the lowest representative APR. If you can, opt for the shortest term possible and only borrow what you need. Pay your dues on or before the agreed date to avoid hidden and other extra fees. Once the loan is fully paid, don't get into the debt cycle by making this the last time you put your vehicle at risk.


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