Doorstep loans caught on a long time back. In fact, doorstep lending emerged as a new wing of the lending industry more than a decade ago aimed at self-employed women, single mothers, tenants, people living on a shoestring, and those professionals who mainstream lenders refuse because of their bad credit history.
Convenience is invincible. You call a doorstep loan provider, and an agent shows up on your doorstep to hand in a cash loan, and then the same agent calls on to collect the payment. But when you get feedback from real doorstep service users, you will get mixed reviews.
Personal experience is what many borrowers appreciate, but this can be a big problem as well. Without adequate credit checks, loans are issued, and then rigorous practices are used to collect payments.
These loans have been made incredibly easy to take out, but it takes a lot of time and effort to see their benefits.
Does that mean you should avoid doorstep loans?
As the saying goes, loans are expensive regardless of their type. These loans are aimed at helping you when you need money for an urgent reason, something you cannot put off. Under no circumstances does a lender appreciate the borrowing for recurring expenses.
Doorstep loans will not be a threat to your financial condition as long as you do not borrow more than your needs. If you do not want to end up paying high interest, you should bear in mind the following tips:
- Not all doorstep lenders are reliable
Experts suggest doing proper research before you put in your application because chances are the company you are applying to charges outrageously higher interest rates.
Some doorstep lending companies charge very high-interest rates, so be wary of them. You will likely end up paying almost the same amount you borrow as interest on top of paying the principal amount.
Beware of lending companies providing these loans without a credit check. A responsible direct lender is bound to run affordability checks so you do not borrow more than you can repay. These loan companies are loan sharks. They will trap you into debt to extort high profits in the form of interest from you.
- Take stock of your affordability
You cannot blindly hinge on the evaluation criteria of a lender to ensure that you can pay back the debt. Your need or your life – a lot of doorstep service providers have been accused of mis-selling these loans. They have been found to offer more than people can afford at a high cost.
Lenders are doing the business of selling loans, so you cannot always expect them to be so generous to refuse you when your affordability is sceptical. Therefore, it becomes more important to do some homework beforehand.
Get an idea of the estimated cost of the debt using an online loan calculator. Based on the estimated figures of interest and total payment, you can see whether your budget has room to bear this additional expense.
- Resist the temptation
With high-cost lenders comes temptation that causes wider financial difficulties. You can borrow as little as €100 without realising that the APR could be up to 500%.
You should avoid these loans to fund any recurring expenses. As far as it is about emergencies, you should check your affordability. The worst scenario is when you have to jump in at the deep end even though your financial position is less than impressive.
Try to consider alternatives like friends or family. They may not have a problem lending you a paltry sum, which is way better than borrowing from a lender. You do not even have to pay interest, especially if you borrow from your parents.
You can consider borrowing from community lenders and credit unions. They will not charge as high as doorstep lenders as they are not profit-making companies.
What if you have been mis-sold a doorstep loan?
Identifying that you have been mis-sold a doorstep loan is not a herculean task. You are free to make an affordability complaint when you are left short of money, forcing you to keep borrowing on and off, worsening your financial condition.
However, if you are unable to make payments for doorstep loans in Cork due to a sudden change in your financial situation or any other reasons, you should first talk to your lender. Explain you’re true financial position to them to seek reduced instalments or a payment holiday.
Suppose a lender is not taking your problems seriously and imposing high penalties, or you are not satisfied with the way they have addressed your problems. In that case, you can make a complaint to Financial Services and Pensions Ombudsman (FSPO), a statutory body that resolves all types of complaints about financial services.
Here are the grounds on which you can make an affordability complaint:
- Your circumstances have changed, and your lender is not cooperating with you.
- You are being chased and intimidated to make the payment on time despite having been told about financial difficulties.
- The agent did not show up, and the penalty was imposed.
- The agent did not discuss your circumstances thoroughly.
The bottom line
Doorstep loans can be a solution to your financial problems, provided you take them out only during emergencies. It is also recommended that you do not borrow more than you can repay. You should check your affordability on your own.
Consider doorstep loan alternatives like credit unions, which charge lower interest rates. Since these loans are mainly aimed at subprime borrowers, you should try focusing on doing up your credit score. A healthy credit rating will let you be eligible for personal loans, overdrafts and credit cards at lower interest rates.
Do your research so you do not wind up in a debt trap. The Provident Company stopped the lending business two years ago, but there are still loans like Provident that you can take out to meet your needs.
