Our modern society can be financially very demanding. It seems like everyone wants your money, and the list of people trying to get you to pay up seems endless.
We also live in a time where technology and innovation make things like borrowing money a far simpler process than it ever has been. In the wake of this convenience, many lending industries have sprung up.
Whether it’s payday loans, overdraft facilities, revolving credit or other type of loan, the markets move fast and take a while to get regulated. We take a look at one relatively new type of industry offering loans – doorstep lenders.
What are doorstep lender loans?
Doorstep loans go by many names. You may see the term ‘home collection loan’ used a fair amount, as well as ‘home credit’ and ‘doorstop lending’. These terms all effectively mean the same thing. They’re short-term personal cash loans that are delivered to your home.
Generally, you’ll make your application, and a representative of the company will come and deliver the cash to your hand. When it comes to repaying your loan, this is also done in-person and from your home.
You’ll find that there are now quite a few companies offering this service. Some operate on a national scale, while others tend to stick to their local areas. They often provide loans of small amounts that you repay relatively quickly. However, they’re also typified by having high interest rates.
Loan amounts generally tend to range from £50 to £1500 and are repaid weekly or fortnightly.
How do doorstep loans work?
Doorstep lenders rely on modern technology to provide their service. As with other short-term lenders (and unlike traditional banks) you can usually secure your money within a very short space of time. However, unlike things like payday loans and revolving credit, you don’t get the money paid directly into your bank account. Instead, an agent visits your home to arrange payment.
Home credit generally tends to follow a similar pattern. The first thing you’ll need to do is find a lender. Check out our list of doorstep lenders at the end of the article. When you log on to their website, you’ll then be able to start getting into the specifics of your loan.
Most doorstep lenders have a very short application form for you to fill out. Usually, it takes just a few minutes to complete. You’ll have to include a variety of personal information, as well as details on how much you want to borrow and your current financial state.
Once your application is complete, the lender then reviews it. This part of the process can take a day or two, depending on the company. Once reviewed, they’ll send a representative to your home to discuss matters. Here, they’ll help you figure out what you can afford to borrow and what your repayment terms are.
After the final details are figured out, the agent will then give you the money there and then. The same agent will then be your point of contact going forward. At the time you’ve arranged for repayment, they’ll visit your home and take the money you owe for that period.
What are the benefits of doorstep loans?
To many, the appeal of a home credit loan may be instantly clear. It’s a quick and convenient way of borrowing small amounts of money. So, if you’re in a pinch, this type of lending can be a lifesaver. But, of course, there are plenty of similarly quick methods of borrowing, why choose this one?
There are several elements that make doorstep loans unique. This includes:
- Quick decisions. If you’re in quick need of cash and don’t want to have to wait for ages to get approved, this type of borrowing can be convenient. You’ll usually get a decision on whether you’re eligible within a few minutes, and then it only takes a day or two to get your money.
- Available to those with poor credit. If your financial situation isn’t the best, it can sometimes be hard to secure the money you need to get by. Often, doorstep lenders don’t require a credit check in order to approve you for a loan.
- No bank account necessary. One of the reasons it often takes a while to secure money from banks and other lenders is because of account transfer times. With doorstep loans, you can get the cash in your hand within a day or so.
- A personal touch. One thing that people miss about traditional banks is the personal touch. Many short-term lenders don’t allow you to see an actual person when you’re dealing with them. With a doorstep loan, you get a representative visit you at home.
Should you choose home credit?
Of course, the benefits of home collection loans make them seem pretty appealing. However, there are certainly some downsides. The main one is the sheer cost of this type of borrowing. Much like payday loan providers operated before the FCA cracked down on them, doorstep lenders charge huge amounts of interest.
Let’s look at an example from popular doorstep lender Morses Club. Save if you took out a £200 loan and wanted to make repayments over 34 weeks. If you paid back £10 per week, the rate of interest works out at 107.1% p.a fixed. This is equivalent to a representative APR of 466.37%. So, the total amount you need to repay is £340. So, it costs you £140 to borrow £200.
There is another concern too. When you deal with this relatively new industry, there are a lot of companies that are new to the market. As such, it can be hard to know how reputable they are. They don’t have the same authority or prestige as traditional lenders. This can make it difficult to know how safe you’ll be.
How do you know if a doorstep lender is legit?
Despite being a relatively new industry, there are still some rules and regulations that give consumers protection. As such, there are a few things you should look out for when dealing with doorstop lenders to make sure they’re legitimate:
- Registered with the FCA. The Financial Conduct Authority monitors lenders to make sure they adhere to rules and regulations. You can check the FCA register to see whether the lending you’re planning on dealing with is registered. If not, you should steer clear.
- Ease of contact. If the doorstep lender is authorised to operate, they shouldn’t shy away from letting you contact them directly. So, check that they have a registered address, company number, phone number, or other method of contact.
- Information on fees. Legit lenders must be clear about any fees or charges that exist for using their service. If you can’t easily find this information, it’s likely they’re trying to hide something from you.
- Rules on money. No lender should be able to specify how you spend the money they give you. If they have rules on how and where you can spend the loan, you should avoid dealing with them,
- Upfront payment. Any business that needs you to pay money upfront to secure a loan should absolutely be avoided. This is a huge red flag for a potential scam.
What rules do home credit lenders have to follow?
Because home credit lenders have to sign up to FCA guidelines, there are some rules and laws that they have to follow. These protect you from feeling pressured into a loan, as well as from racking up huge fees and interest payments:
- Doorstep lenders can call uninvited to offer loans. They need your permission to visit, even if you’ve already taken out a loan with them.
- They need to come round at separate times to discuss details and sign you up. This is in place so you can change your mind and not feel pressured. If you ask them to leave, they have to.
They also can’t charge you excessive fees on your repayment terms. However, FCA rules on payday loans don’t extend as far as doorstep lenders. As such, you’ll often find interest rates are higher on this type of lending.
What are alternatives to doorstep loans?
So, doorstep loans can be expensive, and these types of lenders aren’t always as legitimate as you might want. If you’re considering a home credit loan to pay off your existing debts, you should definitely reconsider. They can end up putting you in a worse financial position overall. So, what are some alternatives?
- Credit unions. These small and not-for-profit organisations usually operate at a local level. So, if your community has one, you may be able to borrow money to help pay off your debts or save up. They often offer much lower interest rates than doorstep lenders.
- Overdraft. If you have a bank account, you may be able to get a fixed overdraft. Usually, they will give you a set limit that you can go into without incurring extra charges or interest. They’re far cheaper than doorstep loans.
- Improve your credit. If you can get a credit card and make regular repayments, you can gradually improve your credit. This will help you gain access to other forms of borrowing, and usually, they offer better interest rates.
- Check benefits. Make sure to find out whether you’re receiving all the benefits you’re entitled to. There are various schemes that help people who are struggling financially.
What should I do if I’m struggling with debt?
If you’re struggling with your finances, there are plenty of places you can turn to for help. For example, you could contact a debt adviser who will be able to give you free and confidential advice on your situation.
Similarly, you can check the UK government’s website, which gives information on the various options available to you for debt management. Citizens Advice also has information about specific types of debt you may have.
How should I choose a doorstep lender?
If you have decided that you do want to take a doorstep loan, you need to do your research. The first thing to do is to look at some of the companies offering services and compare them. Look at things like how much you can borrow, what repayment terms are on offer, and how much it will cost.
Draw up a list of options and run some comparisons between them. You’ll also want to look at some customer reviews. These can give you key insights into some of the positives and negatives of each lender. If you can, you should also contact the company directly to see what they say. Just make sure not to get pressured into making a rash choice.
List of doorstep lenders
There are many different doorstep lenders in the UK. Some operate on a national level, while others focus on specific regions. Here is a list of doorstep lenders that you may come across when you’re researching this type of loan:
- Morses Club
- Estone Personal Credit
- Swann Supply
- Diamond Financial Services
- Speedy Cash
Doorstep lenders compared
Out of the lenders we listed above, there are several that operate on a national level. When it comes to doorstep lenders compared, it’s easier to look at these national companies to get an idea of what they’re about. Below, we’ve outlined how two different doorstep lenders operate:
- Provident. They allow you to borrow between £100 and £1000. If you’ve borrowed from them before, you can extend this to £2500. They offer low weekly repayments over 12, 26, and 52 weeks. If you do miss a payment, you won’t be charged a fee. Their representative APR is 535.3%.
- Morses Club. With this company, you can borrow between £100 and £400. Again, if you’ve borrowed from them before, this increases to £1500. Repayment periods are taken over 22, 34 or 53 weeks. Like Provident, there are no late fees. Their representative APR is 466.37%.
Doorstep lenders – final thoughts
So, that’s everything you need to know about doorstep lenders. They can be highly convenient ways of borrowing very small amounts of cash. Their personal service is fast and convenient too. However, with often extortionate interest rates and fees, it can soon get very expensive. If you’re struggling financially, there are many better options available.