49% interest loans offered to drivers

CAR finance companies are charging vulnerable drivers interest rates of up to 50 per cent, the Mail can reveal.

‘Sub-prime’ dealers targeting drivers with bad credit – after bankruptcy or a County Court Judgment has been issued – can expect a return of as much as £20,000 on a £10,000 loan. Many boast of being able to secure finance for those who have been refused credit at high street lenders.

But the number of people failing to keep up their repayments is not collated by the industry regulator, the Financial Conduct Authority [FCA], leading to fears consumer lending is out of control.

The Car Finance Company, based in Portsmouth, describes itself as ‘an alternative finance lender’ and specialises in ‘bad credit car finance’. The firm advertises interest rates of 49.6 per cent on its website for customers who want to take out a loan without paying a deposit.

A customer taking out a £10,000 loan over four years would be required to pay back £20,010.

Similarly, Glenside Finance, based in Fareham, Hampshire, offers customers who describe themselves as having a credit rating of ‘very bad’ the chance to take out car loans of £10,000 over four years. However, they face rates of 49.34 per cent.

The companies target those with bad credit – who are unable to obtain finance elsewhere – and make a profit by charging exorbitant interest rates.

They say this is justified because they are taking a gamble on the customer.

CarFinance 247, one of Britain’s largest online car finance websites, also offers ‘bad credit car finance’ deals to those who have previously been in arrears or defaulted. While offering a lower rate of 27.4 per cent, a forum on the site also gives advice to those hoping to take out finance.

The Car Finance Company said it was committed to responsible lending. Jim Pike, of Glenside Finance, said the average rate his company lent money at was 30 per cent, adding: ‘We are a simple, honest, well-established finance company.’