Understanding the Cost of a Logbook Loan
Because of its high cost, most financial experts will tell you to steer clear from logbook loans. But it’s always easier said than done. When you’ve been rejected for a personal loan because you have a poor credit score, sometimes it makes sense to opt for alternatives such as logbook loans. Even if the cost may be steep, it offers quick cash that most people need in times of unexpected financial emergencies. If you’re among the borrowers considering applying for a logbook loan, this quick guide will help you understand the cost of a logbook loan.
Logbook loans, on average, have a representative APR of 400%, which in any case is already pretty costly. But then there are also cases when the APR may be higher than the market average. In the same manner, there are times when it can be lower. You just need to shop around to find the deal that offers the most affordable rates.
To illustrate how the representative APR affects your loan’s cost, let’s say you want to borrow £850 at an 18-month repayment term. If the interest rate is flat and fixed at 132% per annum, your loan will require you today a monthly payment of about £141, which will amount to around £2,533 in total. As you can see the interest rates you’ll be paying in the end is more than that of your loan’s principal.
It’s also important to remember that representative APRs are not always the same APR you’ll get for your loan. It’s different from your actual APR. Before you sign any logbook loan deal, make sure you know exactly what your actual APR is. It would also help if you can ask about hidden fees. And if you want additional info on APRs, you’ll find valuable explanations at http://www.investopedia.com/terms/a/apr.asp.