Logbook loans can be expensive. If you’re going to apply for a logbook loan deal, it’s best to understand the real cost of the financial product. This way, you know exactly what you’re getting into.
With logbook loans, there are two major factors that affect its cost. One is the high interest rate and the other is the high risk of repossession. According to market average records, logbook loans come with a high representative APR of 400% or more. That’s multiple times more than a traditional personal loan from a bank or high street lender.
To illustrate, let’s say that you want to borrow £850 payable over an 18-month period. If the representative APR is 450.5% at a flat rate of 132% per annum, your total due will amount to a whopping £2,533 or that’s about £140.72 per month. That’s a lot of money to pay on interest for an £850 loan.
Then there’s also the matter of repossession. Seeing that your vehicle is your collateral for the loan, your lender has all the legal rights as dictated by the debt agreement and “bill of sale“ to recover your vehicle then sell it to cover for your loan balance.
Considering the high risks and high cost, logbook loans should be taken with caution. While it’s highly accessible and you can use it to meet a wide range of personal and financial needs, it’s best to follow what experts say. If you can find cheaper alternatives then do so and reserve logbook loans only as a last resort. Only when you have no other choice should you consider a logbook loan. If you do apply for the financial product, remember to commit to pay on time unless you want to lose your vehicle and pay a lot of money on hidden fees.