Logbook loans are usually secured contracts on cars, although caravans, motorbikes, vans etc can qualify depending on the provider. The borrower signs a standard credit agreement and a Bill of Sale form that transfers ownership during the time that the loan contract is live. The agreement ties in with 2 Victorian pieces of legislation: The Bills of Sale Act 1878 and the Bills of Sale Act (1878) Amendment Act 1882 (these apply to England and Wales). There is a variant in Northern Ireland, but not in Scotland where a hire purchase agreement would typically be put in place. The sector name comes from the V5C registration document (the logbook) that is handed over to the lender.
Back in 2014, the FCA estimated that this industry was valued between £59 and £76 million. This was a big year when 52,580 bill of sales were recorded. This tally was 30,124 in 2016 that shows that there has been a heavy decline in recent years, but this remains a booming market for the dominant players. The oldest brand (Mobile Money) who operates through various trading names is one and the other is Loans 2 Go who are the retail powerhouse with 55+ branches. They became a major force when they joined forces with Hermes Property Services in January 2015. Hermes had taken over the Logbook Loans brand that was the original market leader ran by former footballer (Iain Shearer).
The guarantor loans sector has enjoyed tremendous growth since 2012 that was identified by a Google Trends search. The market leader started out in 2005 and so it did take time for this booming industry to take shape. This may be a relatively modern type of product in the UK, but the history of suretyship can be traced back to a Mesopotamian tablet written at around 2750 BC. This concept functions where someone will assume responsibility for a debt if the borrower defaults. This layer of protection enables the lender to target borrowers with very poor credit histories who most companies wouldn’t take a chance on. This isn’t an issue here.
The reason of course being that the credit scoring is directed instead at the person who is willing to support the applicant and they will need to have a clean credit profile. This subprime niche has been booming for some time, but it has been interesting to see the market supply shrinking with a number of lenders having gone out of business. These were listed in the notes section above. The reason for this looks to generally stem around the limited consumer demand and the dominance of the market leader (Amigo Loans) who has 250,000+ customers. This brand often seen on TV was introduced in 2012 as a rebrand of FLM who had been trading online since 2005.
Doorstep loans have been around longer than any other form of consumer credit. This business model has been plied as far back the late 1800s and has remained popular through to the modern day. This niche has however certainly been tested over the past decade or so through the emergence of payday lending where people can benefit from hassle-free same day cash. This efficiency has been stripped back here whereby filling in a form would usually get the applicant a home visit sometime during the week. Once paid out, there would then of course be the weekly agent visits. A collection would typically be made for a small affordable amount of say £10.
Home collection loans do have a key benefit over payday lending though and this is simply higher acceptance rates. Poor credit that extends to CCJs and defaults is usually ok. Low incomes is generally targeted and we even see no bank account requirements here. Since the balance (that tends to be small) is spread out across several months this helps to create micro payments that most people should be able to handle. It is just important that affordability can be demonstrated. Consumer choice is problematic in this niche with just 3 major brands serving the entire UK (Provident, Morses and Loans at Home). The rest of the companies are mostly small localised firms.
This comparison’s target was the 12 month loans niche that is made up of a large quantity of personal loan providers. Some are prime offerings made to compete with the leading banks whilst you then have the subprime lenders who are usually also targeting payday and instalment terms. Regardless of qualification criteria, the speed to payout often tends to be much slower due to extra underwriting. The contracts are unsecured on sizeable sums and so they need to be extra careful. Some may provide quick e-sign options, but you need to keep a look out for opening hours that may only be standard working hours. Weekend trading is always important to factor.
When you need to consolidate debts or renovate the house the obvious choice would be to head to your bank. The best rates tend to float on that side, but as we all know the banks are very picky. Some of the prime focused companies on this page are designed to rival the banks. This is especially the case with the P2P giant Zopa. There are some companies featured who focus on fair profiles such as AvantCredit and On Stride. We then have the bad credit 12 month loan lenders. In a future comparison we’ll explore guarantor lenders who also cover this term and we’ll also look at the banks to see how their value compares.
Whilst consumer demand remains mostly geared towards payday loans, there is now much more supplier choice in the booming instalment loan sector. For this comparison, we have picked out those that offer 3 or 6 month loans (sometimes both options may be available). The payday niche has been in heavy decline since the FCA’s price capping ruling came into force in early 2015. Potential profits from this point on were tightly squeezed since a provider could only charge 0.8% daily maximum including fees. This resulted in closures, but the more common route was for the payday firms to restructure longer term loans that is why you’ll see so many options featured today.
The company credited as the early trendsetter in this niche was Lending Stream who got up and running in 2008. They arrived with a fixed 6 month loan that is still in place today. Many rival firms stepped forward as time passed on, but the big spike came in 2015. The main benefit of extended terms is the bitesize repayments that are much easier to manage rather than a lump sum when going monthly. There is also a benefit in pricing since a fixed rate of interest is being taken from a shrinking balance as payments are made on the account. This of course works best at 6 months.
Payday lending is a multi-billion pound industry in the UK. The British brand Wonga has been the biggest success story, although there has been a significant share of business flowing through American-owned firms such as PaydayUK (now closed) and QuickQuid. It was the United States where the industry began through store lending. The Money Shop adopted the trend in 1999 whilst the first online lenders arrived in 2003, sparking over a decade of dominance in subprime lending. The FCA replaced the OFT as the financial regulator in April 2014. The FCA quickly became ruthless, with the price cap ruling in early 2015 essentially putting an end to the golden era of payday loans.
British banks have always been overly strict with lending on overdrafts and loans that only increased after the financial crisis hit the industry. The payday firms stepped in, happy to help those in need of a cash boost in a hassle-free way. Around £200 is typically sent out to customers on first applications and with trust earned comes much higher sums. Qualified funds are sent quickly to help cover the customer over the month until their next pay date arrives. With select firms like Wonga you are free to choose the repayment date of your choice that is handy for a short loan of just a couple of days.