Doorstep loans, also known as home credit loans, are short-term loans aimed at subprime borrowers to meet unexpected expenses. They are similar to payday loans. The only difference is that these loans will be offered to you on your doorstep. Since a lender will provide you with a doorstep service, they will charge additional costs. This will increase the cost of doorstep loans. They are more expensive than payday loans. The APR of these loans could be up to 1500%.
Home collection loans are not so popular now. Few lenders provide these loans because the risk of default is too high. You can use these loans to cover a wide range of short-term expenses. Whether you need money for a car repair or you need it to buy something important, you can apply for these loans.
The approval is made based on your repayment capacity. The decision will be made faster if you can easily pay down your debt on time.
How do doorstep loans work?
When you need a doorstep loan, first off, you need to fill in an application form. Once you provide all details, your lender will call you to arrange a meeting with one of their representatives at your chosen time. The representative will visit your house at the scheduled time to discuss your credit needs and repayment capacity.
If they find that you have enough money to repay your debt, they will hand you the money. It is up to you whether you want a doorstep service at the time of repayment as well. If you do so, they will charge extra fees to make arrangements for collecting funds.
Since you are choosing a doorstep service, it does not mean that you do not need a bank account. Most of the lenders provide this service only to hand you money, but when it comes to repayment, they will ask you to discharge it through bank transfer. Therefore, it is mandatory for you to have a bank account. Do not forget to meet other conditions, such as you must have come of age and be a resident of Ireland to apply for these loans.
Doorstep loans involve soft credit checks
When you apply for a loan, a lender is supposed to run hard credit checks. They leave hard search footprints that can be seen by other lenders. They continue to remain on your credit report for about two years, which means you will end up losing your credit points. Every time a lender checks your credit report, credit inquiries will be made, and as a result, you will lose your credit points. This will increase the risk of getting a loan at a very high interest rate.
When you apply for a doorstep loan, there is no risk of losing your credit points, as soft inquiries are made to check your credit report. Soft inquiries are never recorded on your credit report, and hence, they cannot be seen by any other lender.
One of the reasons why doorstep lenders offer home credit loans with soft credit checks is that these loans are a paltry sum and aimed at subprime borrowers. Lenders do not need to check your credit rating as they already know your credit score is less than perfect.
Some lenders call these loans doorstep loans in Ireland without a credit check. Interest rates, however, will be high.
At the time of taking out doorstep loans, you must ensure that you will not struggle with payments. Otherwise, you will end up rolling it over. The cost of the loan will quickly accumulate, and eventually you will fall into an abyss of debt.
Doorstep loans do not improve your credit score
It is worth bearing in mind that doorstep loans have nothing to do with credit score improvement. These loans cannot help but do down your credit rating even if you settle them on time. This is because these loans are not reported to credit reference agencies. However, if you fail to repay on time, you will certainly lose your credit score. This is especially because missed payments and late payments are reported to credit bureaus.
Another reason why these loans do not help with significant credit score improvement is that they are paid off in a lump sum. Even though you manage to settle your debt on time, it cannot clearly indicate your payment behaviour.
Lenders usually want to see whether you manage to adhere to payments despite the ups and downs in your financial circumstances. This kind of scenario is only seen when you borrow a large amount of money to be paid down in fixed instalments. This cannot happen with doorstep loans.
Things to consider while using a doorstep loan
Here are the things you should consider while using a doorstep loan:
- Doorstep loans are quite expensive. They charge very high interest rates. You should carefully determine your repayment capacity before using these loans.
- You should borrow what you can afford. Borrowing more than you can actually afford to pay will trap you in an ongoing cycle of debt. Analyse your income and budget before putting in a loan application.
- You should check the registration of a lender. There are also loan sharks that provide these loans to make money. You would not be able to make an affordability complaint against an unregistered lender.
- Consider alternatives. It is likely that you will be able to get cheaper options, such as credit cards.
- Seek advice from a financial advisor if you are unable to make the right decision. If you are already struggling with debt payments, consider taking advice from a debt advisor.
The final word
Doorstep loans in Ireland are small loans that you can use to meet small emergencies. These loans are also called home credit loans, as money is handed to you on your doorstep. They charge high interest rates, and therefore, the risk is too high. Doorstep loans are paid down in a lump sum, so it is vitally important that you carefully determine your repayment capacity.
