Doorstep loans are not novel. Known as home credit or door-to-door loans, their existence dates back to the inception of online lending. As is the case with other small loans, they can be approved the same day and paid off once and for all. Interest rates will be high as they are aimed at subprime borrowers. What makes these loans different from other small loans is that they are handed to your doorstep.

One of the representatives of a lender will visit your house to hand in and collect money on the payment date. Since your lender is offering your doorstep service, you will end up paying extra fees. This will make your loan more expensive.

How much money can you get through doorstep loans?

Doorstep loans are small loans and are aimed at funding emergency expenses. Though they are a type of personal loan, the borrowing sum cannot be large. These loans are similar to payday loans, meaning you do not need to have your credit score checked. If any lender looks over your credit report, they will make soft inquiries to know about your contact details. The borrowing sum for doorstep loans with no credit check from direct lenders is usually not more than £1,000. In most cases, lenders cap on £700.

Since these loans are similar to payday loans, you will be asked to pay back the debt in a lump sum. Your lender’s representative will come to you to collect funds. If you fail to repay the debt on the agreed date, the loan will be rolled over, adding up the cost of the debt.

Some lenders may allow you to pay down the debt in weekly instalments, but each visit for the collection of payments will increase cost. Eventually doorstep loans will become even more expensive than payday loans.

The APR of doorstep loans can be very high, up to 1500%. Be very careful about your repaying capacity while borrowing money.

How to find out whether you should take out doorstep loans

Doorstep loans are extortionately expensive. If you are looking to apply for these loans, you should use the online calculator to see whether the payments you are to make fit your budget.

When a representative discusses credit requirements with you, you will be told interest rates, APRs and the repayment term. Before you sign the agreement, you should carefully evaluate if your budget has the room to settle your debt. If not, you can back out. Withdrawing from your application will not cost you any amount.

Doorstep loans are expensive

Doorstep loans are expensive as they are signed off on without a credit check. You are deemed to be a borrower with a high default risk, and therefore, your lender will charge very high-interest rates as a way to offset the risk subject to lending.

But that is not just the only reason that makes them expensive. When you borrow money in the UK, every lender is bound to check your credit score and income sources. No lender can approve your application without an affordability check, and if any lender does that, they should not be considered regulated by the FCA.

However, doorstep loans are like payday loans that do not involve a thorough credit check, meaning you will be lent money based on your income details. The odds are your lender fails to determine your repaying capacity. It is always advisable to provide true financial details, so your lender can determine whether your budget has the scope to cover the payments of your doorstep loan.

Since a lender is responsible for assessing your repaying capacity, it does not mean you can throw your caution to the wind. You are borrowing money, so it is your responsibility to scrutinise your repaying capacity. Although you have a chance to file a complaint against a lender in case you suspect that you have been offered more than your affordability, remember that their stance will also be taken into account. If it is found that you failed to provide accurate information, your complaint will be dismissed.

How can you get affordable doorstep loans?

It is rare that you will get a very attractive deal on a doorstep loan, but there are some ways you can get competitive interest rates:

  • You should do the research. Not all lenders charge the same interest rates and APRs. With proper research, you can get some lenders offering better interest rates.
  • Try to use these loans only for a small sum. Even if a lender is ready to lend you up to £1,000, you should try not to borrow more than you need.

What is the best alternative for doorstep loans?

If you want to save money on interest, you should prefer bad credit loans to doorstep loans. These loans are much cheaper than doorstep loans. Bad credit loans involve a hard credit check, so chances are lenders will be able to get a better picture of your affordability.

Money will be directly transferred to your bank account so that you can avoid added fees for doorstep service. Further, you can borrow a larger sum if you need. Payments will be made every month, so you will find it affordable to pay off the debt.

The final comment

Doorstep loans are small emergency loans and you cannot borrow more than £1,000. They can be very expensive because of added fees for doorstep services. It is always suggested to borrow money sensibly.

You should try to consider using bad credit loans as an alternative to doorstep loans. They carry relatively lower interest rates. Associated fees are much lower, so the total cost of the debt will not be very high.

You should focus on creating a budget so you can stay on top of your expenses. Stow away money to build an emergency cushion because this will prevent you from borrowing from direct lenders. Loans can prove to be very expensive and throw you into an endless cycle of debt. Be wise with money.

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