Logbook loans are subprime specialised secured contracts made mostly on cars, although there is often coverage for bikes, caravans, vans and other vehicles. As well as a standard credit agreement there is a Bill of Sale processed that transfers ownership across the period that the money is borrowed. The lender keeps hold of the V5C registration document (previously V5) across this term. The Bill of Sales arranged are valid in England, Northern Ireland and Wales. They aren’t valid in Scotland where hire purchase agreements are instead used. The main criticism with this product type from debt charities is the sky high interest rates, as well as the little protection handed to customers who are at risk of repossession.
What makes this sector attractive in contrast is high approval rates with coverage open to those in self-employment or with very poor credit resulting from CCJs, defaults, late payments etc. The V5C security on a qualifying motor is good enough on its own, assuming that affordability can be demonstrated. A car must be free or nearly clear of finance, as well as being fully insured, MOT’d and taxed. Some firms require newer cars, whilst some impose no limits. A common trait spotted when viewing sites in this niche is the very high potential loan sums pitched of say £50,000. However, the lender only grants access to between 50% and 70% of the vehicle’s current trade value.
Suretyship (the guarantee of the debts of one party by another) can be traced back to around 2750 BC when the oldest known surety contract was marked on a Mesopotamian tablet. In the modern day, legal contracts in this form have commonly been used for mortgages and residential lettings. It was FLM Loans that adapted this concept as an unsecured bad credit loan here in the UK. They launched in 2005, but would later rebrand as Amigo Loans in 2012. TFS has a longer history dating back to 2003, but they didn’t involved guarantors until after FLM. Outside of TFS, the market leader has faced mounting competition from the likes of Bamboo, Buddy, UK Credit and more.
Guarantor lenders deliver some of the highest acceptance rates on the subprime market today. The key reason being that the credit status of the borrower isn’t overly critical since should there be payment issues then the lender can simply take the payment from the person backing the application. This backer can usually be a tenant as well as a homeowner, but either way they require a tip-top credit score. This layer of protection removes the risk and enables competitive subprime rates often pitched between 48% and 50% APR. At this rate for £1000 borrowed over a year you’d pay between £228 and £238. This is a reasonable charge in contrast to the alternative subprime solutions circulating today.
In exploring 12 month loans we’ll be completing 2 linked comparisons. Today we are focused on lenders that cater bad credit or at least those with fairer scores. The other comparison will flip this over to prime where providers (especially banks) are competing to offer the lowest sector rates that are available on more sizeable loan contracts. As a variant of today’s subprime listings, we’ll later compose guarantor and logbook comparisons where each will be compared at the year point. For the listings below there are 2 types of lenders featured. Firstly you have the companies that made their name as payday or instalment firms. Many now extend to a full year.
Then there are those designed more as personal loans where the year is generally the starting point with more sizeable sums to match the extended terms. It is pricing that really differentiates these 2 groups. Those geared towards instalments often charge above £900 for a £1000 requested. The personal loan providers in contrast generally drop to less than half that price. The most competitive of which come in between the range of £200 and £300. This helps them to bring the challenge to guarantor firms where £230 to £240 is the common price point. The requirement to find a backing on that side is balanced out by higher acceptance rates where marks like CCJs aren’t an issue.
Lending Stream launched in 2008 with a payday loan similar to what was available elsewhere across the market. Step forward to 2011 and they would unveil a new instalment product. This showed that they were one of the early trendsetters. Mass switching would eventually follow with many payday firms when price capping was actioned in 2015. Today, providers may offer flexible terms across any number of months, but the most queried niches are 3 and 6 month loans that we’ll be scoring at below. The key benefit for borrowers is the ability to spread a chunky balance out across several months. This creates more manageable repayments to minimise that chance of late payments and even default.
This assumes of course that you are applying for a similar level of cash as you would over a shorter term. The interest also works out cheaper for instalments since a fixed rate is impacting a reducing balance. Search data showed that a higher number of users search for installment loans (the Americanised spelling). The specific most popular choice is a 6 month loan. This is a handy period to create bitesize repayments and at the same time if you decide to settle early then most lenders are happy to let you do this. There is little difference between eligibility for payday/instalments. Applying for modest sums and being prepared to upload documents is advised.
The UK’s once booming payday sector hit a brick wall in January 2015 when a daily 0.8% price cap was introduced by the FCA. Other regulations were introduced on default charges as well as a 100% cap on charges against the amount borrowed. As a result, many closures went ahead including of note PaydayUK who were at one time a market leader. Some firms rather than close up followed the money trail of instalments where they could keep customers on more profitable longer contracts. Profits from monthly borrowing may now be squeezed, but there is still no subprime niche with greater consumer interest than this one. “Payday Loans” in itself is searched for 246,000+ times monthly via Google.
This is the central keyword, but there are many other bulky search terms searched thousands of times. You just don’t get this level of interest with other subprime forms on products be that doorstep, guarantor, logbook etc. Moving along to today’s comparison, the idea has been to list each and every active lender sorted by Alexa rankings to show you who most people are using in 2018. Each listing also shows the available amounts & terms, opening hours and the monthly £100 cost. Once approved you can expect funds to be transferred within 2 hours. There may be a decline or when flagged you may need to upload your bank statement or have a workplace verification call.