Not all lenders require borrowers to attend their premises, or to contact them via the World Wide Web; some lenders are happy to visit borrowers at their homes. The common name for these lenders is doorstep lenders (but they can also be referred to as doorstep money lenders). Credit obtained via them is known as home credit, doorstep loans or door to door loans.
What are Doorstep Lenders?
Doorstep lenders are consumer credit providers that operate by having direct personal contact with borrowers and potential borrowers. Most companies operating in this part of the finance industry have teams of agents that visit the homes of lenders to offer credit; though this can be as a result of an enquiry by a potential borrower, often these agents will make unsolicited visits to possible clients. This can either be due to the company having teams of agents in a given area, knocking on every door, or it can be as a result of the company purchasing information that shows the potential client is either in debt or is likely to be in debt.
If the borrower wishes to take a loan with the company, then the agent can usually calculate the cost of the loan and the repayments there and then, and complete all of the necessary paperwork. This means the borrower can receive the money very quickly.
After this the agent will make regular visits to collect loan repayments. Unlike with most loans, repayments from doorstep lenders tend to be weekly rather than monthly. In addition, the fact that the agent will make regular house calls to take repayments means that bank accounts are not always necessary for those wishing to borrow from doorstep lenders.
Problems with Doorstep Lenders
Many companies offering home credit have come into criticism due to the way they operate.
A major problem with the short term loans offered by doorstep lenders is the interest rates charged. Compared to the loans offered by standard high street lenders (such as banks and building societies), these interest rates are very high, and can add significantly to the cost of any loan: it not uncommon for rates of one thousand percent or more to be charged.
Another problem is that doorstep lenders often target vulnerable clients, namely those with a bad credit rating. These consumers will often have difficulty borrowing elsewhere, and so are targeted by doorstep lenders. Due to their inability to find other sources of credit, these people are more likely to apply for doorstep collection loans despite the crippling interest rates that can be charged.
Additionally, though most doorstep lenders will be licensed, some are not. These unlicensed doorstep lenders, known as loan sharks, often charge interest rates of thousands of percent, and have been known to employ violence to ensure repayments continue. They should be avoided at all costs.
Anyone having problems with doorstep can complain to the Consumer Credit Association, if the lender is legal and belongs to that body.
It is better to borrow from other lenders rather than resorting to doorstep lenders, payday loan companies or pawnbrokers; credit unions, for instance, will often offer credit to those with a poor credit rating or a history of CCJs (County Court Judgements), and the interest rates they charge will be much more reasonable. Anyone with such a history is also advised to get help with debt management from one of the many charities or official bodies that offer such advice, as it is often possible to avoid doorstep loans with the right advice.