Understanding the Concept of APR
When comparing or shopping around for a competitive deal on logbook loans, one of the most important factors you’ll need to investigate is the annual percentage rate or APR. As the name suggests, APR represents the actual yearly cost of your loan as charged over a specific term rather than just the monthly rate. The cost will cover all other fees associated with the loan transaction.
Agreements and APR details will vary from one lender to another. For the case of logbook loans offered in UK, the average is about 400% if not higher. As in sync with consumer rights, APR is heavily standardized in the country and transparency when advertising said rates are also enforced.
Remember though that APR as advertised on your lender's website is known as just the Representative APR. This is not the exact rate for your loan but just a representation of how the loan will cost yearly. To know the exact rate or the real cost of the logbook loan, you need to speak with your lender directly and have them explain or give you a quote before signing the contract.
To better understand how APR works, here's one example. Let's say you're going to borrow money from the lender with the lowest Representative APR in the market today. In this case, it's going to be Varooma with APR at around 190.26%. If you're going to borrow £1,000 over 12 months at 70% fixed per annum rate, your monthly due will amount to £141.67. That will amount to £1,700 which means you will be paying £700 in total interest for a loan of £1,000 over a 12-month period.
Based on the example above, when perusing APR, some of the things you need to account for are per annum rate, loan term and loan amount. Make comparisons of each factor so you'll have a better idea which of the options is actually cheaper. If you’re still confused about what and how logbook loan interest rates really work, you can read a more in-depth explanation about the Representative APR at Money Facts.