Following my article in January and the respective questions we received back, I feel it important to clarify what you could potentialy be sold into, why and by whom.
Despite being in times of austerity there is an increasing amount of money available for lending, most certainly not on the high street but in the second-tier lending market through challenger banks. There has also been a major shift into the sector by capital companies and private equity. So, what are the differences and what should you look for?
A normal car loan is Hire Purchase, where the car is the security against the loan facility. Hire purchase is available as fully amortising or with a balloon (offset) payment. Here comes the crunch – Hire Purchase is divided into two different documents, Regulated and Unregulated. Up to now a Regulated facility has only been available to a maximum loan value of £62,500 and has very beneficial consumer legal rights attached to it. You can make over payments at any time and any amount and more importantly – if you wish to early settle, there are no early settlement penalties, the full content of the document has to be explained to you and up to a certain level, carries a 14-day cooling off period. Your whole legal position is much stronger.
As stated, a Regulated agreement has normally been available for loans up to a certain limit and then becomes an Unregulated agreement beyond that amount. So, what is the difference? An Unregulated agreement is where a lender requests that you exclude yourself from those important consumer rights and detail by asking you to provide a High Net Worth Statement to be completed and signed by your accountant. This is a formal declaration that your income is more than £150K per annum and or that you own assets to a minimum value of £500K excluding your family home. Why? Well, as a high net worth individual you are expected to understand how the world works and hence do not need protection from the law when it comes to borrowing money. What are the benefits for you? Absolutely none. And to the lender? Well, that’s different as it excludes them from having to offer favourable early settlement terms and you cannot make over payments unless scheduled into the agreement from the outset. You are expected to know exactly what you are entering in to and what the terms are if you decide to leave the agreement early.
Additionally, from the lenders perspective they are less scrutinised by the FCA when underwriting your application under “responsible lending regulation”, have more flexibly about the amount of money they lend you and how they lend it. They do not have to explain the full details of the facility they are offering you and often don’t even try. This, is why you will see a vast number of new lenders with capital to “sell” into the market but beware, these are mainly Unregulated lenders who do not want the responsibility of offering Regulated Agreements and attractive overall terms.
So where is the revolution? Within the past 6 months we have been able to access two key lenders in this high value sector of the market that will indeed fund high value cars and assets on a Regulated document. This is a BIG shift in our service offering as it enables you to raise large sums (In excess of £1M if required per car) to purchase high value cars with all the benefits of being able to early settle and make those ever important over payments. We can even offer this on capital release too. So, if you need to raise funds for use in your business or another capital outlay, you can now feel secure with total flexibility on the terms of the loan. If you have an Unregulated agreement with another lender – we should take a look at it for you.