Should You Borrow From A Doorstep Lender? Interest Rates & Price Guide
In this article we are going to be taking a look at the question, should I borrow from a doorstep lender? We will check out the pros and cons of doorstep lenders and have a look at some of the interest rates that you may be charged. Basically we will tell you if borrowing from a doorstep lender is for you or not.
Doorstep lenders are companies who basically offer you money on your doorstep. Well that’s not quite true, these days with all the rules and regulations things are a little different. But the principle is still the same. A company will come to your home and give you a loan, then they will return to your home to collect the repayments over a set period of time. So are doorstep lenders something that you should consider, or should you avoid them at all costs? Well let’s take a look.
Doorstep Lenders Quick Cash
Should You Consider A Doorstep Lender?
The first thing to realise is that a doorstep loan is not for everyone. You do tend to find that loans from doorstep lenders have a far higher interest rate than a standard loan from a bank. However the fact is that you also get the additional service and convenience of someone calling at your home to both give you the loan and then collect the repayments.
If you have a bank account though and are happy to explore other options then we recommend you do this first. Have a look and see where else you might be able to borrow money from and then compare interest rates. Ideally you want to be going for the cheapest interest rates available to you. Doorstep loans are usually over a short period but they are not to be confused with payday loans. A payday loan is a loan over a very short period of time, usually no more than a month. If you want to borrow money just until your next payday, then a doorstep loan is probably not what you need.
If you want to borrow a large some of money over a longer period, then once again it is unlikely that you will be looking at doorstep lenders. You normally find that they do not lend massive sums of money and the longest term you can borrow over is often no more than a year or two at most. Although there are of course exceptions to the rule.
So now you know a little bit more on the subject, let’s take a look at some of the pros and cons of borrowing from a doorstep lender.
The Pros Of Doorstep Loans
So first of all let’s look at the positive side of things. There are many advantages in borrowing from this kind of lender. First of all as we have already mentioned there is the convenience factor. Some people do not have bank accounts so they can’t set up direct payment, so having someone call at their home to collect repayments is a real plus. Then you have the fact that someone delivers the money to you at your home, simple and easy.
Probably the biggest pro of borrowing from a doorstep lender is how easy it is to get the money. Borrow from a bank and they will want your credit history, proof of earnings and lots of other things that you may not have. Whereas use one of these lenders and they are far more likely to give you a small loan to start off with. They do not worry to much about your credit history, they won’t want to see wage slips or anything like that. Even if you are not working they will be able to give you a small loan. Most of these companies work on trust, they offer a small loan to start off with and then if you make regular repayments they can offer you further credit in future.
Another real benefit with most doorstep lenders is that they offer a fixed rate of interest. In other words when you sign the credit agreement there are no nasty surprises. If you agree to pay a loan back over a year but for some reason it takes to years, you will not be charged additional interest. If you take out a payday loan on the other hand, if you pay back late they start adding massive charges onto your bill. Most of the larger companies will offer fixed rate loans so that you do not incur any hidden charges. Although of course pay back your loan late and you may not be offered further credit.
The Cons Of Borrowing From A Doorstep Lender
There is however a downside to these type of companies. The most widely talked about problem is the amount of interest you pay back on money borrow. There is often a great deal of talk about APR, the fact is though with fixed rate loans this figure is really unimportant. All you need to know is how much interest you will be paying back in total. The prices do vary from company to company but you will usually find that you pay a lot. Below we have given a list of prices on some popular loan amounts. These are taken from Provident Personal Credit who are one of the largest doorstep lenders in the UK. These will give you an idea of what you will have to pay back on a loan.
Doorstep Loan Interest Rates Over 52 Weeks
As you can see some of the interest can be very expensive. One thing to remember though is that pay back the money early and you will usually get what is called a rebate, in other words you won’t have to pay the full interest amount.
Another issue with these companies is how easy they make it for people to get into debt. You may start by just paying £5 a week back, but as you make the payments you will be offered more and more credit. Before you know it the repayments have mounted up and you are paying back more than you can afford. Also double check the rates of interest you are paying back and make sure you know exactly what the weekly repayment are going to be.
One final problem is with smaller companies. There are a few big ones around, for instance in the UK you have ones such as Provident, Greenwoods and Shopacheck. These are all good reliable companies that will treat you fairly. There are however independent companies out there that will rip you off. Be sure to check who you are borrowing from and make sure you are not getting involved with a bogus company.
Are They For You?
As you can see there are plenty of pros and cons to using doorstep lenders. The reality is though that for some people this is a very useful service that can be vital. For people on low income or for those who are self employed or even unemployed then borrowing money in this way may be the only viable option. Yes these companies do tend to charge high interest rates, but they also provide a very valuable service which is ideal for many people’s circumstances.
If you are in a position where you are considering where to borrow money from, the most important thing is to consider all the options. Shop around for the best price and work out which companies and services you will be able to borrow money from. If you are then happy that a doorstep loan is for you then by all means borrow from them. Although they often come in for some negative press, doorstep lenders do provide and invaluable service to thousands of people.