- May 30, 2020
Doorstep Loans: Angel or Devil
Doorstep loans are prevalent among the unemployed, the disabled and the retired. As the name suggests, the representative of a lender will visit your home, discuss your credit needs, evaluate your repaying capacity and hand money.
The representative will also collect the payment at your doorstep. These loans are an ideal option, even for those who have no functional bank account due to any reasons. Doorstep loans are short-term loans the repayment length of these loans is the same as payday loans, and you will pay back the whole of the money in a lump sum.
However, there are a few lenders that allow for payments in instalments, but they are usually weekly or bi-weekly. Payday loans are not widely popular nowadays because of the very high rate of interest. They are not accessible everywhere, and hence the demand for doorstep loans have risen.
If you ask whether doorstep loans are an angel or devil, it is hard to come on the one side of the fence or the other. This blog has discussed both sides of the coin.
Doorstep loans are affordable as repaying capacity is taken into account
When you apply for doorstep loans, all you need to do is fill out the form online, and then one of the representatives of the lender will schedule a meeting at your home. The representative will come to your house to discuss your credit needs and evaluate income statement.
When you apply for a payday loan, you mention the amount you want to borrow in the form and the lender transfers money to your account. You will likely get cashless than your requirements in case the representative is sceptical about your repaying capacity.
The representative will take into account your recurring expenses to find out how much money you have left after paying them. If you have hard money left, you will be turned down. Doorstep loans are not less risky than payday loans as you get what you can afford.
Some doorstep loans come with instalment repayments
Another benefit you can avail with doorstep loans is instalment repayments that do not come with payday loans at all. Though the amount is usually small, some lenders allow you to repay the loan in instalments. However, these instalments are either weekly or bi-weekly.
Lenders have provided this facility to borrowers as it makes the repayment more manageable. Reimbursing the whole of the amount you borrow in a lump sum is more complicated than paying it back in two or more instalments.
Since doorstep loans also aim to help the unemployed, lenders have introduced the instalment repayment system. Unemployed people generally rely on unemployment benefits or a part-time job that often makes a lump sum repayment difficult.
Now that you have got to know why doorstep loans can be said as an angel, but there is still a lot, you need to know before reaching to a conclusion.
Additional charges can add up the cost
There is no doubt doorstep loans are signed off on after analysing your affordability. If your repaying capacity is called into question, the lender will not approve your loan. Despite affordability assessment, these loans can be expensive, especially when you have a bad credit rating.
Interest rates for doorstep loans are usually higher than other short-term loans. At the time of meeting with the representative of your lender, you should confirm the total cost of the loan. Interest rates of these loans can be higher due to processing fees.
Since the representative will visit your house for processing the loan and at the time of collecting the loan, it will include additional charges. However, not all direct lenders charge fees when they approve doorstep loans.
Whether doorstep loans are an angel or devil, it depends on your perspective. A good piece of advice is you should apply for doorstep loans only when you need money urgently. Try to avoid borrowing money if you can put off expenses. Since you have to pay off more than what you borrow, you should be careful with borrowing. Try to use online calculators to get a rough idea of the total cost of your loan.