The Cost of Logbook Loans
One of the chief disadvantages of logbook loans that financial experts often point is its high cost. Logbook loans, on average, have a representative APR of 400%. This is several times more than what traditional personal loans for people with bad credit cost. It’s high cost is also one of the reasons why it’s not always a recommended solution to your financial problems.
Despite the high cost and the controversies, however, there’s no denying the fact that logbook loans are not only easy to avail but it is a handy alternative if you have bad credit. Rather than reject the financial product as a financial solution, you can consider it as a last resort. After exhausting other cheaper alternatives, only then should you consider getting a logbook loan. And before you sign any deal, it’s imperative to understand the costs of the product.
How much do logbook loans cost?
As mentioned, logbook loans come with an average representative APR of 400% but thanks to stiffer competition, some lenders may offer less than that. Some lenders, for example, offer logbook loans at 30% representative APR. To illustrate how this particular logbook loan deal costs, let’s say you want to borrow £1,000 over a repayment period of 12 months. If the APR is 300% and the fixed per annum flat rate is 96%, you’ll be paying around £163.34 per month or a total of £1,960. For a more in depth understanding of how APR affects your loan’s cost, click here.
As you can see, the interest rate including other charges that you’ll be paying for a £1,000 logbook loan is almost equal to the loan amount. Logbook loans, again, is pretty expensive. It’s very important for you, as borrower, to borrow with caution. Keep your borrowing to the minimum if possible and always aim to pay your monthly dues on or before the due date to avoid incurring extra charges and fees for late or missed repayments.
What’s the upside?
But there’s an upside. Despite its high cost, logbook loans are very easy to avail. When you’ve been turned down a personal loan elsewhere, logbook loans may save the day. Lenders do not run credit checks on applicants, which means you can avail the loan even if you have a history of defaults or ccjs. With your car as collateral, logbook loan lenders are able to offer borrowers larger loan amounts. In comparison with unsecured loans, logbook loans are without a doubt a much better choice especially if you need a larger amount for a financial emergency.