When you don't have a bank account or are struggling with a poor credit history, home collected loans provide you with an alternative way of borrowing money. Doorstep loan companies offer a personalized service where you get to liaise with a local agent rather than a faceless call centre.
These lenders help people who have been declined for credit elsewhere, but they have come under the scrutiny of the Office of Fair Trading (OFT). Ray Watson, director of the OFT's Consumer Credit Group, states, "We are working to improve practices in the industry to protect vulnerable consumers."
How Much Money Can I Borrow from a Doorstep Lender?
People who need fast cash don't need to pass a credit check. It doesn't matter if you've defaulted on past credit agreements, you can still borrow up to £500 over a period of up to 52 weeks. Contrast this with a payday cash loan where the maximum lending term is normally one calendar month.
Once you've demonstrated that you're a dependable customer, you can get a bad credit cash loan for up to £2,500. Better still, you can spread the repayments over up to 108 weeks. Many customers are able to develop an excellent relationship with their doorstep loan company.
What's the Cost of Home Collected Loans in the UK?
In an article for the Daily Telegraph on the 10 October 2008 called "The high cost of doorstep loans", Kara Gammel stated, "Provident Financial, which lends money door-to-door to people with poor credit, explains to its customers that if they borrow £300, they would repay £504 over 56 weeks, an APR of 183pc."
Since the onset of the recession, the cost of borrowing has continued to rise. For example, a door to door loan for £300 over 33 weeks from Greenwood Personal Credit will cost you £495. The APR is 433.4%. You can compare cash loan rates at Lenders Compared, an independent price comparison website.
Pros and Cons of Doorstep Cash Loans
A doorstep cash loan could help you to deal with an urgent financial need, such as repairing your vehicle so that you can get to work. However, it's inadvisable to borrow money with bad credit for a frivolous purpose. It's important to remember that you're effectively spending tomorrow's money today.
Home collection loans are invaluable for people who need fast cash, but they don't come cheap. Lending money to an adverse credit customer is a risky proposition, so you should expect to pay a usury rate of interest. This will reduce your disposable income until the money that you've borrowed has been completely repaid.
Sources:
- Gammel, Kara. (10 Oct, 2008). "The high cost of doorstep loans" Daily Telegraph.
- King, Mark. (20 Dec, 2010). "OFT cracks down on doorstep lenders" The Guardian.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
Comments