Debt from Doorstep loans

Low earners hit by excessive charges...

Doorstop loans are often taken out by low earners to help 'make ends meet', or to pay for one-off purchases such as school uniforms for their children. The charges for doorstep loans are high, with customers paying over 150% in annual charges on average.

What is a door stop loan?

Money Advice Direct received 1000’s of calls each month from people in the UK heavily in debt from doorstep loans. To combat the rising problems we now send over 100,000 leaflets on how to deal with debt from doorstop loans to thousands of housing estates in the UK warning the public of the problems relating to doorstep loans.

Doorstep loans are a convenient way to borrow money without leaving your home. Doorstep loans are loans offered by home collected credit services. A doorstep loan is a type of personal unsecured loan for any amount from £50 to £500 lent by a local representative or agent to the person’s doorstep.

The doorstep loan agent will pass by the person’s doorstep once a week or month and collect the installments from the doorstep of the person’s property.

Doorstep loans are targeted to the following vulnerable groups who would not be able to access credit elsewhere:-

• Young mothers.
• People living in social housing.
• People on low incomes.
• People living in large council estates.
• People with bad credit.
• Single mothers
• Lone Parents.
• The Unemployed.
• Immigrant groups.
• The poorest members of society.
• Those who are financially excluded.

The above groups are in need of small but regular amounts to help them get by from week to week. The repayments are small thus easily affordable.

The Doorstep loan lending industry.

The success of the doorstop loans industry is based upon the good relationships built between the doorstep loan collector and the person taking out the doorstep loan itself. The actual agents are normally people living in he community, who are very nice and unthreatening.

• The doorstep loan industry is worth £100 Million per year.
• The average loans are 10% more than the average loan offered elsewhere.
• More that 2 million people each year use doorstep loans.
• The average size of loan offered is around £300, with loans as little as £100 common.
• They are often taken out by low earners to help 'make ends meet', or to pay for one-off purchases such as school uniforms for their children.

Disadvantages of the doorstep loan sector

• Customers are not offered independent advice on prices and other loan options.
• No price comparison are offered with other lenders
• Printed statements are not provided giving relevant Consumer Credit Act information.
• Early redemption discounts or incentives are not generally offered.

The good news is that these criticisms are to met and overcome by the UK Competition Commission, a department of the government. The idea of government intervention is doorstep loan lenders will have give the public better choice and lower prices.

Who are the main doorstep loan providers?

At present, a 3 lenders dominate the market with a 50% share, namely Provident Financial, Cattles and S&U, each with their own regional stranglehold. There are around 500 other smaller firms trading too in this sector.

Common questions arising from debt from doorstop loans are the following:

• Long and short term credit - how can debt from doorstep loans affect my credit rating?
• How do I prevent debt from doorstep loans from affecting my dependants?
• I don't want to become bankrupt. Can I prevent debt from doorstep loans causing this?
• If I consolidate my debt from doorstep loans, would that be a wise move?
• Now that we have the debt from doorstep loans, can I still open a bank account?

Money Advice Direct are campaigning against the extortionate practices of doorstep lenders and ask that people in debt from doorstop loans call the helpline on 0800 074 6918.

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