Should a Passport ever be given for a loan?

artdeco_2

My Mom's best friend's husband had not been paying some rent to their housing association, which his wife didn't know about. They've managed to kind of sort that out. He is not working, and she is earning not much as a part time cleaner. They have 3 children and their Grandmother lives there also, so money has been very tight.

She rang us today, and said that they had got this loan from a place in Slough, which she reckons isn't a loanshark type place. The loan is to pay the back rent.

They are paying £132 a week for 13 weeks. I don't know the APR, but I think the loan was for about £1000.

She also told us that her husband had to put his car up as security, and the company have taken his car log book and his Passport until the loan has been paid.

My question is: Is that normal practice to take his passport?

She seems happy with the loan, but we're worried that because they almost lost their house, they might have gone into this blindly.

Thanks for your help

Stink_Pod

:eek: Jeeezus, that would seem to be a very very dodgy deal to me. Mainstream lenders do not take cars or passports as security - ever. Full Stop.

13 weeks @ £132 = 1716, meaning £716 interest over a 3 month period, in my experience this means the loan is not within the boundaries set by the consumer credit act, as it is on unfair terms, typically where the apr is greater than 48% the courts will find that the lender is guilty of extortion. If you need help with regard to the steps they can take, just yell and I'll dig out some useful contact details for you. (It may be tomorrow, though)

Hunnymonster

artdeco wrote:

My question is: Is that normal practice to take his passport?

Only if the loan is with Big Vern's Loans - where missed payments are taken with a baseball bat.

It's definitely immoral to hold someone's passport, and possibly questionably legal to do so without just cause (and I doubt a debt security is going to be a just cause)

Alfie_E

artdeco wrote:

My question is: Is that normal practice to take his passport?

No! The passport office states, "Your passport is the property of Her Majesty's Government and it cannot be used as security for a private debt." See Essential Information About Your New Passport. The loan company had no right to ask for his passport, as he had no right to give them it.

Stonk

Close your eyes if you don't want a scare.

I think that the APR is 457%.

grumbler

Stonk wrote:

I think that the APR is 457%.

My calculations yield 7.9% per week. :eek: APR is more than 5000%. Yes, five thousand.
I think the assumption about £1000 is incorrect.
For £1500 result is 0.85% and 55%. This is more realistic.

ffacoffipawb

Stonk wrote:

Close your eyes if you don't want a scare.

I think that the APR is 457%.

More like 7852% (yes, seven thousand eight hundred and fifty two percent) according to my Excel spreadsheet.

Alfie_E

ffacoffipawb wrote:

More like 7852% (yes, seven thousand eight hundred and fifty two percent) according to my Excel spreadsheet.

I agree. And, even if the loaned amount was £1500, that's still an APR of 177%

grumbler

Alfie_E wrote:

I agree. And, even if the loaned amount was £1500, that's still an APR of 177%

Yes, you are right. I made a mistake. About 2% per week and about 180% APR :eek:

mrcow

Never mind the APR, are they going to get their car back in one piece

It sounds like it's a bit too late to be doing anything about this though? Do they have a written contract? What does it say about the security? I mean, what exactly are they going to do with the passport if they default?

I'd seriously be very worried.......

Stonk

More like 7852%

Eh? That can't be right. Consider just the first week. Amount owed: £1,000; 1 week's interest: £1,000 x 78.52/52 = £1,500. The interest accrued by the end of week 1 far outweighs week 1's payment, and the capital outstanding in week 2 will be even higher. Hence it would never be repayed, ever, at £132 per week.

I calculated it two ways in Excel:

(ONE) =RATE( 13 , 132 , -1000 , 0 , 0 ), which gives a rate of 8.7797% per week, i.e., 457% per year (no, you don't compound it to get 7852%, that's not what the output of RATE means)

(TWO) By making a little chart of each week's capital, interest and repayments at a specified interest rate, and tweaking the rate until the final balance is zero.