Doorstep lending via home credit loans is a popular choice amongst UK residents who have poor credit and typically low incomes with no access to bank accounts. Licensed home credit companies offer cash loans which are home delivered by local agents who then arrange to call round every week to collect the agreed repayment. The payment will consist of principal plus fixed interest, and will not be subject to other charges, as the totally exorbitant interest rates applied cover additional costs such as late payments, and the agent’s commission fee of typically £10 an hour.
Provident is probably the most well known name in doorstep lending, but there is a slew of other companies operating across the UK. A typical lender of home credit is Shopacheck, operated by Welcome Financial Services. It offers home credit loans of up to £500 in either cash or high street vouchers, with repayment terms of 32 weeks. Their loans are available to people with bad credit, including CCJ’s and defaults.
Existing customers have the option of taking out larger loans and earning high street vouchers through recommending friends. One recommendation earns a £10 voucher; a second earns £20; and a third £30. Thereafter all friends’ recommendations earn a straight £10 voucher.
The finance charges attached to all Shopacheck loans are a huge 399.7% APR. A typical cash loan of £300 will be repaid over 32 weeks at £15, bringing the total cost of the loan to £480. Shopacheck is no means alone in charging such high APR’s, with some companies charging above 600%.
Any potential taker of a home credit loan would be better advised to make use of the online site Lenders Compared Org. UK, rather than the recommendation of their friends. Lenders Compared is an excellent site which is simple to operate, and compares the loan costs attached to the amount a customer needs to borrow, within their area. The site is independently run and financed through the largest of the home credit companies. It is regulated by the Office of Fair Trade and operates in partnership with such organizations as the Consumer Credit Association.
Borrowers simply type in the amount they wish to borrow with their postcode to access a list of local lenders and their rates. On a typical amount of £500 over a 32 week repayment period I was able to access the following rates for one UK postcode: Provincial Funding 330% APR; Loans at Home 399.7% APR; Shopacheck 399.7% APR; and Morses Club 433% APR. The total amount to be repaid in total when borrowing £500 ranged from £750 to £825, showing that consumers who make use of home credit loans really need to compare rates to avoid the highest charges.
Any consumer who does borrow in this way has the right to pay off the loan early at a reduced interest rate, by putting a written request in to the loan company. Home credit loans represent an extremely expensive method of borrowing but are legal and licensed. In their favor they are safer than using unlicensed loan sharks which compete for the same core group of customers.