Urgent Doorstep Loans: Are They Still a Viable Option?

Doorstep loans are called home collection loans. They are small emergency loans aimed at meeting unexpected expenses. The reason why they are called home credit loans is that money is lent to you on your doorstep. In order to apply for urgent doorstep loans, you have to fill in the loan application online, and then a lender would contact you to arrange a meeting with one of their representatives. The representative will visit your home on the day you choose.

After discussing your credit needs and your repaying capacity, the loan amount will be decided. If you meet the criteria, money will be handed to you on your doorstep. If you want, you can arrange a visit to pay off the debt, too.

Urgent doorstep loans are repaid in full on the due date. The loan amount cannot be more than £1,000. Lenders require you to pay them down in fell one swoop. The repayment term for these loans is not more than a month. Doorstep loans are like 10-minute loans with no credit checks.

They work the same way as any other small emergency loan, including payday loans. Doorstep is a service. When money is handed and collected on your doorstep, it would, of course, add fees and other charges. This will increase the total cost of the debt.

Now the question is whether doorstep loans are viable.

Few lenders provide doorstep service

As you know that doorstep is a service, which will increase the cost of the debt. Urgent home collection loans are already expensive because they are aimed at subprime borrowers. When your credit rating is abysmal, your lender will perceive you as a risky borrower. They will charge high interest rates in order to mitigate their risks involved in lending you money.

Because money is offered to you on your doorstep, you will be charged extra fees. This will significantly raise the total cost of doorstep loans. You should pay attention to the APR rather than the interest rate in order to compare the cost of home collection loans.

While the APR of a payday loan can be up to 1,000%, the APR of doorstep loans could be beyond 1,500% and that is because of added fees. This can increase the cost of the debt significantly. A rule of thumb says that you should be cautious while using doorstep loans.

As these loans are repaid in full on the due date, most of the borrowers struggle to do so. As a result, they keep rolling over the debt. Eventually, the cost of the debt continues to accumulate. It becomes so high that you fall into an abyss of debt.

Fearing that they will lose their money, lenders feel indisposed to provide doorstep loans. They will rather provide you with alternatives such as payday loans and no credit check loans. They are more affordable than doorstep loans.

What purposes can you use doorstep loans for?

Home credit loans are small emergency loans. They can be used for a variety of small expenses such as:

Utility bill payments

These small loans come in handy to meet unexpected utility bills. In harsh winter days, you might need to consume heating energy for long hours. This might unexpectedly raise the total amount of energy bills. It is likely that your budget does not have the wiggle room to settle your bills. If so, you should consider taking out doorstep loans, but make sure that next time you remain economical with using power. Otherwise, the recurring nature of the utility bill.

Unexpected home repairs

If you have to renovate your house and your renovation budget has fallen short of cash, you can bridge the gap by taking out doorstep loans. Bear in mind that these loans could help you meet only small unexpected expenses. If you need a large amount of money to renovate your house, these loans are not an ideal option.

Vehicle repairs

Your car can start acting up at any time. Every time cash is not readily available. If it is so, you should try to consider taking out doorstep loans. These loans can help you cover unexpected repair costs. Since it is a one-off cost, there is no risk of falling into debt.

At the time of applying for a doorstep loan, you should always ensure that you are not using it for recurring expenses such as groceries, rent, and the like. Doing so will trap you in an ongoing cycle of debt.

Ways to avail yourself of lower interest rates for doorstep loans

Here are the ways to avail yourself of lower interest rates for home collection loans:

Research and compare lenders

First off, you should look for lenders who provide home credit loans. Every lender has their own method to assess the default risk. If they perceive you as a risky borrower, they will certainly charge high interest rates. Payday loans are regulated by the FCA. Interest rates are capped at 0.8% per day, but doorstep loans are not FCA regulated and hence lenders can charge as high interest as possible. This is why the APR of these loans is higher than payday loans.

In order to obtain the most competitive interest rates, you will have to research the best lender. Comparison websites can also help you compare interest rates. Note that actual rates will vary because of added fees and associated charges.

Assess your financial condition

The next step is to assess your financial condition. Doorstep loans require no credit checks. It means the loan amount will be disbursed based on your repaying capacity. Therefore, your lender would emphasise your repaying capacity. If your income is not good, you will most likely be rejected. You should always evaluate whether your budget has the potential to repay the debt without struggling with your essential expenses.

Avoid having any other debt

Doorstep loans can be easily approved if you do not have any other outstanding debt. Having any other debt obligation will make your lender sceptical about your repaying capacity. They will most likely reject your application. If any lender manages to sign off on it, interest rates will be so high that you will most likely end up with insurmountable debt.

Ways to apply for home collection loans

Here are the steps to apply for home credit loans:

> Fill in and submit the application form online. The lender will contact you to arrange your meeting with one of their representatives to hand you money on your doorstep.

> During the home visit, the representative will verify your documents and income sources, too. This will enable them to understand your repaying capacity. The loan is approved only when you prove your repaying capacity.

> If your loan application is approved, the agent will hand you cash. However, in some cases, the cash is transferred to your bank account.

Are doorstep loans worth it?

Home collection loans are worth it only when you are using them to meet small emergency expenses. Funding recurring expenses with them is not enjoined. If you need money to meet one-off emergency expenses and you are not certain about your repaying capacity, you should avoid borrowing money. Try to consider alternatives such as borrowing from friends and family.