I don't understand what type of loan you have. How is it split if the HPI part is paid off separately from the rest? I assume the loan is not a Hire Purchase agreement because, if it is, the lender can repossess the van.
However, unless there is something unusual about the loan the information that the police can arrest you is not correct. Loans are a civil matter and not a criminal one and the police and jail do not come into it.
The normal course of events would be for the lender to issue a County Court claim for the money owed. You would then be able to make a repayment offer to the Court and give them details of your finances. You must make an offer, even if it is only �1 per month. The Court then issues a County Court Judgement which states how much you have to pay each month. If you comply with this then the lender can do nothing more. If you don't comply, then they can go back to Court to get the judgement enforced - by bailiffs, possibly attachment of earnings (I am not sure about this one) and various other ways.
Do read the whole of your loan agreement carefully. The above is based on my understanding of the normal position for loans under the Consumer Credit Act. If there is anything in your agreement you don't understand, you should get advice from a CAB or other independent service.