Home Credit and Doorstep Loans
Compared to other types of credit, doorstep loans are expensive and should be avoided.
What is a doorstep loan?
Also known as home credit, doorstep loans are provided by a lender whose agents come to your door to arrange the loan and then to deliver the cash.
What’s not to like?
The problem with this type of borrowing is the pressure put upon the borrower knowing a collector is to visit them. This leads to the debt being prioritised over other more important debts and bills.
Home credit and doorstep loan borrowers are often vulnerable people, often without access to a bank account and therefore without access to cheaper means of credit.
Part debt collector – but mostly a salesperson
It’s easy to slip into the habit of getting the loan topped up as the collection agent may put – in other words; if you make a payment, you can borrow more.
This means the lender has got the borrower where they want them – perpetually in debt to them and paying them at the expense of other debts.
A doorstep collector is not your friend
They are paid commission on what they collect and what they sell. The agents are coached to empathise with and develop a personal relationship with the customer. This is so they can sell to them over and over again.
Make sure the lender is authorised
All lenders must be authorised by the Financial Conduct Authority (FCA); if not, they are trading illegally. If a caller at your door offers to lend you money, you should ask to see proof the FCA authorises them. If they can’t provide this, they are likely a loan shark and you should end the conversation and report them.
Rules for home credit lenders
By law, home credit lenders shouldn’t call on you uninvited to offer loans. If you already have a loan, the agent should not offer further credit while visiting to collect repayments. They need to arrange a separate visit to discuss any details and to get you to commit. This is so you’ve got time to change your mind about the visit, without feeling under pressure.
What if I can’t pay
All a doorstep collector can do is ask you to pay. They are not bailiffs and don’t have powers to take away your belongings.
For this type of lower-level borrowing by people with few, if any, assets, it’s unlikely bailiffs would ever come into play. They can only become involved once the matter has been to court and then when you have not kept to the repayment terms set out in a court order. Furthermore, you would be given notice in writing that bailiffs were coming.
Don’t agree to borrow more
If you have only this debt and can afford to offer some level of payment; Offer this, no matter how small. That’s better than saying you can’t pay. This shows good faith on your part while you work out a longer-term solution.
There may be extra fees and interest to pay, but the law says that for any given loan, the borrower must not be asked to replay more than double to the principal amount lent.
Get independent advice
The collector is not your debt advisor. They want you to pay them before anyone else. You should never pay the creditor who shouts the loudest to the disadvantage of your other financial commitments.
Be polite – but firm
If you’ve other debts tell the collector you’re seeking professional advice and you will be in touch once you’ve decided how to act on this. Don’t let them inside. End the conversation there and close your door.
For more information see Dealing With Debt Collectors At Your Door