Doorstep loans for unemployed people, low income families and individuals with bad credit have become a 3 billion pound business. A recent Equifax survey found that 32% of people with a bad credit rating had taken out a doorstep loan to help with money problems.
Doorstep loans are usually available for between £50 and £500 to help people with short term financial difficulties and personal debt problems. They are always taken out over a short term due to the high APR charged by doorstep lenders.
Are Doorstep Loans for Unemployed and Low Income Families a Good Idea?
Low income families tend to struggle with financial difficulties because they don’t have the disposable income to cope in an emergency. A doorstep loan for unemployed or disabled people may seem like a good idea, but the high APR can create problems further down-the-line for those borrowing money.
The market-leading doorstep lender, Provident, charges up to 365% APR on doorstep loans. Low income families borrowing money over 31 weeks and making repayments in £10 multiples will pay back up to £310 on doorstep loans. Fall behind with payments and the interest and charges will quickly build-up, creating further financial difficulties and even higher personal debt.
Debt Problems and Financial Difficulties
Unless someone seeking to borrow money has only short term financial difficulties, a doorstep loan isn’t a sensible move. If struggling to make ends-meet now, what is the chance of being able to do so the week after? Unless a personal situation is set to change, going to a doorstep lender could make matters worse.
Doorstep Loans and Bad Credit Ratings
Having a bad credit rating happens when a borrower has either missed or made late payments. This serves to exclude bad credit customers from mainstream lending products. Whilst most people would use their credit card or bank overdraft, this isn’t always available to those with bad credit.
Doorstep loans provide bad credit customers with an opportunity to borrow money at a high APR of up to 365%. This can help with short term financial difficulties, such as paying the mortgage, rent or a utility bill. It isn’t sensible for people with a bad credit rating to take out a doorstep loan to pay for luxury items.
A doorstep loan isn’t a suitable source of long term borrowing due to the high APR of up to 365%. However, they do provide a more cost-effective means of borrowing money than Payday loans. Loans for unemployed, disabled people and low income families should be avoided for non-emergency situations in all circumstances.