A Guide To Doorstep Loans
Sometimes, you may need some extra cash to handle a financial emergency. Perhaps an unexpected expense has come up, such as a car repair or dental bill. Finding quick and easy cash loans for a reasonable interest rate is not always easy, especially for those who have bad credit.
Doorstep loans are a new type of loan that are becoming very popular with consumers who need cash fast.
What Is A Doorstep Loan?
A doorstep loan is a type of loan that is provided to you by a lender who comes to your home. These loans are normally for small sums of money, starting at £50 and may go up to £1,000 at most.
The loans are given for a short period of time, such as a year, with the repayments being collected on a weekly or fortnightly basis. The lender will actually come to your home to collect the repayments.
How Do These Loans Compare To Other Types of Loans?
Doorstep loans tend to have a much higher interest rate than regular bank loans or credit cards.
For example, if you borrowed £200 from a doorstep lender, you would likely pay a higher interest rate than if you had borrowed the money on your credit card which charged a higher than average interest rate.
Secured loans offered by a traditional lender require that you offer collateral for the loan, while no collateral is required for doorstep loans.
With unsecured loans, you do not need to offer collateral but the interest may still be higher than a secured loan (but lower than the interest on a doorstep loan.)
Pre paid credit cards are different from doorstep loans because with a pre paid card, you can simply add on the amount of funds that you choose before using the card, whereas with a doorstep loan the lender will simply give you the amount of money you want without prepaying anything.
Are Doorstep Loans Regulated By the Government?
All credit lenders must be authorised by the Financial Conduct Authority (FCA) before they can offer loans. If a lender is not regulated by the FCA, they are acting illegally and can be fined or imprisoned.
This will provide some comfort to consumers to know that doorstep lenders are subject to oversight by the Government.
The FCA will carefully examine a doorstep lender and their operations to ensure that their activities are legitimate and not merely a scam.
You can check if a person or company is registered with the FCA by searching the FCA register here.
What Should I Do If I’m Approached By A Doorstep Lender?
Doorstep lenders sometimes generate business by going from door to door, similar to a salesman, offering prospective customers information about their products and services.
If someone comes to your door offering to lend you money, the first thing you should do is ask to see some proof that they have permission by the FCA to offer loans. If they can’t provide this proof, they are likely to be a loan shark.
You should end the conversation right away and report them to the FCA. Legally, lenders should not come to your home uninvited to offer you a loan. They must have written permission to visit your home.
This also applies if you already have a loan and the lender offers you another loan while visiting you to collect repayments.
They must arrange a separate visit for discussing the details of a new loan before signing you up.
This gives you some time to change your mind about the loan without feeling pressured by the lender. In addition, if the lender does visit you on a separate occasion to offer a new loan, you are allowed to change your mind and ask them to leave at any time.
Ultimately, it is up to you whether or not you decide to take a new loan.
I Submitted An Application For A Loan. Am I Obligated To Take It?
No, you are not obligated to take the loan. Submitting an application is merely stating that you wish for the lender to consider and approve the application, and to contact you to discuss your loan options.
During this time, you are free to ask questions if you are unsure about anything.
You may withdraw your request for a loan if you decide that you are not comfortable with it. However, if you are ready to proceed with the loan, you must officially agree to the terms of the loan with the lender.
You then become obligated to repay whatever money you borrowed along with the agreed interest.
When Will the Lender Come To Collect Repayments?
The lender will come to your home to collect the repayments at a mutually agreed time that is convenient for you. When finalising the loan, you can arrange a time with your lender to collect the weekly or biweekly repayments.
If you need to change the date or time of the payment collection you can do this by contacting the lender.
As mentioned, the lender cannot come to your home unless you have given them permission to do so.
What Happens If I Miss A Payment?
You should carefully read the terms of your loan agreement to ascertain whether there is a late fee or penalty for missing a repayment.
In most cases, you will not be charged for missing a repayment, but you should contact the lender to discuss how you can avoid missed payments in the future.
If you are missing payments frequently, the lender will discuss your account history with you and try to work out a solution for paying back the debt.
While you may be tempted to accept an offer from a doorstep lender, you should think it through carefully first.
You may feel frustrated because you have bills that you can’t pay, but don’t rush into a decision. Remember that borrowing money at a high rate of interest may add to your financial problems.
If you are struggling to pay bills or meet your financial commitments, get help from a debt advice service.
The National Debtline is a free telephone helpline that aims to help people who have debt problems. It is open to anyone living in England, Wales or Scotland. This is a free and confidential service that may help you get out of debt. The number is 0808 808 4000.
Alternatively you can reach them online at nationaldebtline.org
The Money Advice Service is an independent service created by the government to help people manage their money better.
They provide free, unbiased advice about credits cards, loans and how to handle debt. You can reach them at 0300 500 5000 or through their website at moneyadviceservice.org.uk.
Only you can decide is a doorstep loan is right for you. If you are feeling financially strained, don’t rush into a decision or take out a loan in haste. You need to know what all of your options are.
Do your research and make sure that you are fully informed about the terms of the loan before signing a contract. If you have any doubts about a lender, contact the FCA with any questions you may have.