When taking out a loan, do you need to prove that you can repay?

NigelFNg

Hi there,

I would really appreciate any advice that you could offer on whether there is any requirement to be able to repay a loan before it is given out.

My brother in law bought a car last year. He was sold the car on finance (over 60 months), together with Gap insurance and PPI. He was unemployed at the time, had been for some time and still is now.

At the time that he took the loan, he had a small amount of money left in a few ISAs, but no prospect of work. He cannot afford to repay the money loaned for the car - was not able to when the loan was taken out, and unlikely to be able to in the future.

I am helping him at the moment, and would appreciate any comments / advice - even if I have missed the FAQ!

Many thanks, Nigel.

leanneq

No idea but he signed the credit agreement understanding what it was so, quite rightly, he has to pay! Silly man, why on earth did he do it when unemployed?

_Andy_

What did he state and sign to on the application in terms of his employment status and income?

asandwhen

Its called taking responsibility for your own actions.

R0bert_Sterling

asandwhen wrote: »

Its called taking responsibility for your own actions.

There's an exclusion zone around a lot of MSE posters preventing that ideology.

"blame someone else"

sp1987

So let me get this straight....

He took out car finance which at the time he was unable to pay, cannot pay now and does not see a prospect of being able to pay?

I cannot believe people would be so irresponsible. It is much less of a worry when people lose jobs or have increasingly larger outgoings and then cannot maintain repayments, but to say he never expected to be able to sustain the repayments just sounds horrendous.

Return the car and pay the difference between its value and the loan amount, as its value will be decreasing all the time. Cheap cars can be bought for £100-£500, granted nothing to show off but if he needs to get from A to B that is the option.

Comyface

NigelFNg wrote: »

My brother in law bought a car last year. He was sold the car on finance (over 60 months), together with Gap insurance and PPI. He was unemployed at the time, had been for some time and still is now.

How on earth did he get PPI when he was already unemployed? He must've either misled the salesperson about his employment, or it's a major mis-sale!

First things first, get that cancelled asap!

marshallka

Comyface wrote: »

How on earth did he get PPI when he was already unemployed? He must've either misled the salesperson about his employment, or it's a major mis-sale!

First things first, get that cancelled asap!

See lots of cases like this where people are either unemployed or soon to be and the loan advisor knew of this and gave the loans and PPI. You can even get credit cards when you are unemployed. Who is to blame????

Comyface

marshallka wrote: »

See lots of cases like this where people are either unemployed or soon to be and the loan advisor knew of this and gave the loans and PPI. You can even get credit cards when you are unemployed. Who is to blame????

Probably a rhetorical question (?), but I do blame the greedy banks putting pressure on their salespeople/'advisors' to sell.

Rednoseranter

It would be worth knowing who sold him the Loan and Insurances, as GAP is involved I suspect it was the car dealer? You also need to find out what your brother-in-law put on the application form - I'm suprised that a lender would consider lending someone who was unemployed this finance in the current environment - did he tell the seller that he was unemployed and was this recorded on the application form?

There's not a lot you can do about the GAP Insurance its a valid product irrespective of employment status. The PPI is different, if your brother-in-law told the PPI seller that he was unemployed and this is recorded on the application form then put a complaint in on the basis that this shouldn't have been sold. Again it all depends on what was said at the sale and what was recorded on the application form (which your brother-in-law signed?)

In response to your specific question - there is no requirement to ensure ability to repay - most lenders will do a creditworthiness assessment i.e. what is the applicants propensity to pay based on previous history, current credit outgoings and stated income.

Good luck.

NigelFNg

Thank you all for your responses, and believe me I agree with much of the sentiment that is being expressed.

Rednoseranter - very useful response, thanks.
The loan / PPI / GAP insurance all came through the car dealer - it must have made their day!

It is good to get a definite response on whether there is a requirement to ensure ability to repay (even if it is not in his favour!)

The PPI was for accident / sickness, not unemployment cover. I am not sure how this works - he says that he was not asked about his employment status (although the policy states that it will cover payments if he cannot work due to accident / sickness). I have the "demands and needs" form for the PPI and this does not ask the question re: employment status. No info on the loan bit yet.

Thanks again - I will keep you informed.