Representative APR Explained
When shopping for a logbook, one of the financial concepts you'll often encounter is the Representative APR. APR which stands for annual percentage rate is the concept lenders use to advertise their loan offers. The financial concept is used to quote loan offers which already include all the charges associated with said loan including the interest rate.
For example, if a logbook loan is advertised to have a Representative APR of 353.3% and you want to borrow £850 payable in 24 months at a flat rate of 120% fixed p.a., the total charge for credit will be £2,040. This translates to a monthly payment of £120.41 per month or a total of £2890 in total.
As you can see, the 2-year cost of the loan including all charges and the interest rate is a whopping £2,040. You can lower that amount by cutting the loan term short which means you'll need to pay a higher monthly repayment but lesser in total interest in the end. If you want a cheaper loan, you'll need to look for a logbook loan that offers the lowest representative APR. Rather than confuse yourself with computations and financial jargons, you just need to compare APRs to ensure that you'll get a better deal.
But there's a hitch. Since most lenders only advertise Representative APR, it doesn't mean that you will always get said rate. In fact, only 51% of successful applications get to avail the representative APR. The rest of the applicants may either get approved for a lower or higher rate than the representative. To know more how APR works, click here.
In any case, the trick to getting the best available loan deal is to go for offers with the lowest APR. Look for lenders who have a solid track record and have been known to offer APRs below the market average.