The Pros and Cons of Doorstep Loans: A Balanced View

Doorstep loans, also known as home credit loans, have always been the first choice for many borrowers. Especially, the digitally excluded people with no bank accounts can borrow funds using this loan solution.

Doorstep loans - A mix of smart and risky decisions

A good financial decision is all about making an informed decision. For that, you will have to know what comes with a loan product.

Have you also ever exploited the doorstep loans for your financial emergencies? If yes, then you must have experienced that, like every other loan product, this one too has its own pros and cons.

If not, you should read below to have a balanced viewpoint about home credit borrowing options.

Pros of doorstep loans

Why not start with the positive aspects of borrowing cash while sitting at home? Below are the points that prove that funding at your doorstep is a good idea.

Erases discrimination towards digitally absent people

Usually, people with no bank account are not considered important by finance companies. However, the reality is that they too have financial concerns and need money support. If you, too, have no digital account, borrowing funds is still possible through home-visit loans.

A fast digitizing world demands online loan procedures, which certainly saves time, hard work and money spent on paperwork. However, there are still people who are not very tech-friendly and need personal attention while borrowing funds. Thanks to home collection loans that offer this opportunity, even if you have no bank account in your name.

Credit friendly

You can apply for the funds with a less-than-perfect credit score, too. Especially in the case of an online direct lender, current payback ability is more important than credit history. Therefore, it is possible to borrow money despite a poor credit history.

Affordability assessment is still the most important part of the application procedure. Showing a regular income with earning stability are two vital aspects. Financial records of the past six months’ act as a decisive factor in the approval process.

Cash disbursement and repayment collection at home

When you get approved, a loan executive from the lender comes to your place. Also, when the time to repay funds comes, the same loan agent visits your home to collect instalments. Isn’t it convenient? Yes, it is for sure.

You don’t have to worry about anything at all. Just sit at home conveniently on your couch or in your living room, and the loan agent will do the job. From the start to the end of the loan tenure and full repayment, the executive will take care of most of the things.

Generates employment for the local community

To offer home collection loans, lenders need people in local communities who can visit the houses of the borrowers. For that purpose, finance companies hire people from the local community. They train them, equip them with skills and pay for their services. Some lenders offer freelance, part-time, as well as full-time job options.

This creates employment in a specific area and creates earning opportunities. Those who are struggling with a money crisis due to a lack of income can join such loan companies. In fact, many companies give good incentives for achieving targets, which means extra income.

More personalized borrowing

Yes, getting funds while you are sitting comfortably at home or in your garden is a luxury. Besides that, you get personalized attention for your loan requirements. Whatever doubts you have about the loan terms and conditions can be cleared when the loan executive comes to your place.

This personal attention makes it convenient for you to borrow as well as repay funds. Finding the right source of funds when you are in desperate need of funds is important. The home-visit loans become your priority due to personal interaction and personalized lending.

Disadvantages of home credit loans

Now it is time to see the other aspect of doorstep loans that explains taking funds at your home may have its own challenges.

Risk of over-borrowing

It is true that the loans come with a higher cost. However, the easy availability of funds at your doorstep may cause you to urge to borrow a bigger amount. You may need a smaller amount, but considering the hassle-free process, overborrowing is possible.

This can result in bigger instalments, and not paying on time will incur the cost of interest, which is already high. Hence, gradually your finances get derailed, making it difficult for you to pay timely instalments. Be aware of your decision and borrow an amount that you actually need.

Impact on credit score

If you fail to make timely payments or default on a loan, your credit score will drop sharply. As the loans are expensive, you may need to work on a debt settlement or debt consolidation option.

Both choices do help in settling the debts, but at the same time show weaker money management of the borrower. This is why that too causes a drop in credit rating. Once your credit rating goes down, it takes time to recover and repair your credit record. This means, in the future, you will not be able to qualify for loans easily.

Not suitable for long-term financial needs

The doorstep loans are designed for small amounts and short-term loans. They are used for urgent and expected expenses. Hence, if you need a large amount and need a longer tenure, it cannot happen. For that, you will have to apply for any other loan or depend on social borrowing.

Not every time you need funds urgently or only for a short-term need. Sometimes, the requirement for funds is crucial, but money should be in large figures. Hence, in such circumstances, depending on doorstep funding is not a practical solution.

High rate of interest

The loans are doorstep come with a higher interest rate. It is because many times, the lender has no bank account. In that case, the lender has to offer urgent doorstep loans with no credit check. There is no online financial record of the borrower. Hence, the lender takes it at a high-risk profile.

As a result, customizing the loan offer at a lower rate may not be possible. Due to this one factor, the loans do come with a higher interest rate. Hence, the instalments too cannot be pocket-friendly all the time. This is why, you make sure you check your affordability through a free loan calculator.

Impact on privacy

From loan disbursement after approval to collecting repayments, for everything, the loan agent visits your place. Hence, in that case, you will have to be at home. It becomes like a restriction because if you are not at home, a delayed instalment may invite a late payment penalty.

Also, it affects your privacy. Not every time are you ready to receive a visitor. Hence, in that case, it is a compulsion that may make you feel suffocated due to the visit of the loan agent. However, the agents are just doing their job and can’t avoid collection repayments.

Conclusion

As you can read above, doorstep loans have both pros and cons. It is all about how rationally you decide to borrow. The most important thing is to work on two factors. First, avoid over-borrowing and second is avoid delayed instalments as it degrades credit score and increases the total cost. Otherwise, it is true that despite disadvantages, home credit loans are saviours for many out there.