Doorstep loans are going mainstream among the unemployed, the disabled and the retired. The aim of these loans is to provide access to funds during financial emergency conveniently. All you need to do is fill out the application form, and one of the representatives of the lender will visit your home to discuss your credit needs and look over your repayment capacity.
If you prove your affordability, you will get funds at once. You do not need to have a bank account to apply for these loans. The convenience that these loans carry trickles the fancy of as many borrowers as possible, but are they affordable? Doorstep loans in Leeds come with a minimal amount of money, which is why the length of these loans is not beyond a month. Once the due date falls, the representative will come at your doorstep to collect funds.
Since the representative will have a face-to-face meeting with you, the cost of the loan is likely to include the processing fees. Of course, they will charge money for providing convenience to you. Additional fees can add up the total cost of your loan. This may vary from lender o lender. Therefore, you should compare interest rates and ask if they charge any fees.
A default can throw you in a debt spiral
Interest rates of doorstep loans can be high, and if you have a bad credit rating, it becomes impossible to get an affordable deal. The length of these loans depends on the amount you borrow. It can be two weeks or a month. Not all lenders provide installment facility. Most of the lenders take money back in a lump sum. If you fail to pay off the debt on the due date, the lender will charge late payment fees and interest penalties.
For instance, if you have borrowed £200 for 20 days, at 0.8% interest, you will have to pay £232 in total. It means you will pay £16 for every £100 borrowed as interest.
Suppose you have made a default, which is why the lender has extended your payment to the next 30 days.
- The interest payment will go up to £80 (£32+£32+£16).
- The principal amount will be the same i.e. £200.
- Late payment fees will be, for instance, £15.
- Interest on late payment fees will be £3.60.
Hence, the total payment you will make after a default is £298.60. It means you will pay £66 over your due amount. If you continue to rollover your loan, the cost of your loan will add up, and you may fall into a debt trap.
What if you need the money and you have an existing home credit loans?
Financial emergencies can crop up anytime. There is always a possibility that you may need more money when you have an existing doorstep loan. You cannot apply for the loan with the same lender unless you clear all other dues. In this situation, you need to contact a different lender to borrow money. You will go through the same procedure, and if the lender finds that you can manage to repay your debt, you will get money.
Remember that home credit loans are not a solution to long-term debt problems. Taking out a new debt when you have an existing home collection loans might be dangerous. Interest is an out of pocket expense, and if you have been facing cash shortfalls, you will have an immense difficulty repaying your loan, and you may fall into a debt cycle.
The final word
No loan is expensive. The rule of thumb says that you should apply for doorstep loans in London only when you are sure that you will not fall behind repayments. Since a lender evaluates your affordability before lending money, it does not mean that you do not need to examine your repayment capacity. Financial experts suggest that you should create a budget and make a repayment plan.
Since you know how much you need to pay beforehand, you can set aside money to avoid falling behind the repayment. Some online lenders offer these loans at lower interest rates with no processing fees. Make sure that you contact those lenders when you need money.