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Personal loans are suitable for those with any type of credit rating and are useful in times when you need a debit card when you don't have a bank account.
Could some types of personal loans be on their way out?
In these times where some people are having difficulty in paying their personal loans, the last thing that consumers need is to have a type of loan which gives them a bad deal.
This is why the Office of Fair Trading has said that it could be making a stand against types of personal loans which are known as logbook loans, after hundreds of complaints from consumers about how the loans are secured against the borrower’s assets.
The topics for the complaints which were made have included fears that the tactics used to collect debts were unfair and intimidating; that there was little protection against repossession for those who fail to keep up with repayments; the excessive money which has to be paid to make the loan active and the legalese used in the contract that a borrower has to sign.
With a person being given a loan that is secured against the car, the vehicle can then be repossessed without the lender having to go through legal channels. This has resulted in many vulnerable people falling victim to the shaky nature of the finance which is being offered.
The Citizens Advice Bureau is calling for changes to be made in the near future. This method of personal loans, one of the first which were established back in the 19th-century have been deemed as ‘behind the times’ and ‘irrelevant’ to the needs of the modern consumer. The law which has been making these loans legally binding was created back in 1878 – well over 120 years ago.
When this is combined with the unfair and inaccurate claims which are made by some lenders who are offering logbook loans, many people who have been having cashflow problems have had to endure the consequences.
A spokesperson for the Citizens Advice Bureau added: “People can end up in serious debt and risk losing their car and even their home when they borrow money this way.”
The next few months are going to be the last for logbook loans – a market which was worth £30 million in the financial year between 2008 and 2009. The only fears now are that the lack in presence of these loans, a resort for those who have bad credit and who have been refused money elsewhere, will result in rises in those who are engaging in illegal personal loans.