Doorstep loans are primarily small cash sums which a lender makes available by visiting you at home. The amount that you borrow can initially be as little as £50-100 cash. However as you borrow more the balance can increase up to £1000 or more. You normally make weekly repayments which you hand to an agent who collectes from you in person. Doorstep loans are normally offered to people with poor credit histories who cannot borrow elsewhere. The interest charged on the loan will often be between 40-50%.

Advantages of Doorstep Loans

There are arguably some advantages of doorstep loans. Firstly if you would normally be turned down by other lenders you can borrow cash despite having a poor credit history. This is not to say however that door stop lenders do not work to their own strict lending criteria. Provident Personal Credit which is one of the largest such lenders reportedly refuses 60% of all the requests to borrow funds that it receives.

Secondly doorstep loan repayment terms can also be an advantage. Generally repayment is on a weekly basis with the lenders representative coming to you home to collect the cash repayment. This method of collection can be extremely helpful because the amount collected each week is relatively small and therefore manageable. This system helps you to budget for the repayments.

Disadvantages of Doorstep Loans

There are some significant disadvantages of doorstep loans. The main one of these is the high rate of interest charged. 50% is much more than the average loan rates charged by high street banks.

Having said that the rates charged are not hidden. This rate together with the total amount you will be required to pay are usually clearly written down in a repayment book. If £100 is borrowed to be paid back at £5 per week for 30 weeks, the total to be repaid of £150 is clearly displayed in the repayment book.

The other significant issue with door stop loans is that because the loans are generally repaid over relatively short periods the total monthly repayment amount can become very high. For example if you have borrowed £1000 you might end up paying more £25 a week. This on its own may not sound much. However it is more than £100 a month which you might struggle to repay depending on your available surplus income.

Should you take a Doorstep Loan?

As with all forms of credit the argument as to whether doorstep loans are of benefit or not will largely depend on your personal financial circumstances and ability to manage these. The lending terms are normally very clear. Therefore as long as you can afford to repay the loan it can be a very useful tool.

However there is always the possibility that you will borrow more than you can realistically afford to repay. The repayments will then inevitably start to be a problem. If you find yourself in a situation where you have borrowed money from door step lenders and are now struggling to repay this you need to get advice from a debt expert straight away.