Doorstep Loans

Comparing doorstep loans and personal loans

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With all of the different types of loans available to you, it can be difficult to choose between them. Everybody needs something different from a personal loan so there’s no one answer to the question “which personal loan is right for me?”

In this article, the 786 Loans team will explain what a doorstep loan is, what a personal loan is, and the types of borrower each loan is aimed at.

Doorstep loan versus personal loan – how much can you borrow?

Doorstep loans are usually for smaller amounts of money. If your application is successful. you can expect to receive a doorstep loan from anywhere between £50 and £1,000 for first-time customers. These sorts of loans are ideal for low-income households, those on benefits, and anyone looking for a simple loan for a small amount of money.

As far as personal loans are concerned, you have a lot more options with how much you can borrow. Typically, personal loans for people with bad credit histories can be anywhere from £100 to £2,500. Different lenders will have different requirements for who can take out these loans and there are a variety of reasons that you might want to take out a loan for this amount of money. For example, your car may be in need of repairs or you might have to meet funeral expenses.

Doorstep loan versus personal loan – how long do you have to pay it back?

You can arrange to pay back doorstep loans from anywhere between 13 and 52 weeks. This is for first-time borrowers. In some cases, existing borrowers may be able to negotiate longer repayment periods of up to 104 weeks.

Typically, personal loans are paid off within 12 months. You can take out loans for a shorter amount of time, however – as little as 2 months in some cases (or one month for a payday loan).

Doorstep loan versus personal loan – how often do you pay it back

You pay back doorstep loans on either a weekly or fortnightly basis whereas personal loans are normally paid off in monthly instalments. There are some personal loan providers which offer a weekly repayment service.

Doorstep lenders collect their repayment in cash and personal loan companies collect their repayments by direct debit.

Doorstep loan versus personal loan – do lenders need to be licenced?

Yes – both lenders need to be authorised by a regulatory body called the Financial Conduct Authority (FCA). The FCA makes sure that loan providers aren’t taking advantage of their customers and they also ensure that customers are aware of their rights at all times during the lending process.

Doorstep loan versus personal loan – Financial Conduct Authority protections

Personal loans offer all of the protections that the FCA guarantees. These protections include a 0.8% maximum daily interest cap, a £15 default fee maximum, and the assurance that you cannot pay back more in interest that you took out in the loan.

Unfortunately, these same guarantees are not available for those who choose doorstep loans. The FCA is reviewing the lack of guarantees so this may change in the future. However, as it stands, there is no such protection from doorstep loan holders for borrowers.

Doorstep loan versus personal loan – bad credit loans?

If you have a less than perfect credit score, there is no need to worry. You can still apply for and be accepted for a variety of personal and doorstep loans. Both of these loans offer bad credit options. Naturally, the APR of these loans will be slightly higher, however, they are easier to qualify for.

Doorstep loan versus personal loan – how many borrowers?

1.3 million people take out doorstep loans each year. The current number of personal loans taken out each year is unknown; however, it was at 1.2 million in 2009 according to the BBC.

Doorstep loan versus personal loan – do I need a credit check?

Yes – both of these kinds of loans require a credit check.

The higher your credit score, the more options will be available to you in terms of the lenders that are willing to lend to you. Additionally, these providers will consult your credit history to see how many personal loans you have applied for recently. If you have applied for too many personal loans in a short space of time, you might find it difficult to be accepted for a short time afterwards. This is because it appears to the loan provider that you are applying for personal loans and you keep getting rejected – even if this is not the case.

You should be aware of inadequate credit checks performed by some doorstep loan providers. There have been some instances where doorstep loan providers haven’t been through in their credit checks, resulting in some people being unable to pay off their loans. This can result in these borrowers spiralling into debt. In order to avoid this, make sure to check that whichever loan provider you choose is an FCA authorised loan provider.

Doorstep loan versus personal loan – borrowers on benefits

Many borrowers on lower incomes or borrowers on benefits choose doorstep loans because it seems like a simple way to borrow and repay a loan. However, there are several reasons that you should consider a personal loan instead.

Mainly, you are far less likely to come into contact with an unauthorised personal loan provider than you are an unauthorised doorstep loan provider. This means you won’t be put into a position where you could be pressured into taking more loans than you need.

Additionally, with so many authorised personal loan providers to choose from (good credit or otherwise), you are almost certain to find a better interest rate on a loan if you find the right lender. This is especially important for those borrowers who are on benefits. This keeps you safe and allows you access to emergency finance that you can comfortably repay.

Doorstep loan versus personal loan – what happens if I fall behind on payments?

If you fall behind on your payments with a personal loan, you should tell your loan provider immediately. This gives them time to arrange a new repayment schedule with you. Additionally, you will be less likely to have to pay any penalties for a late payment if you inform them in due time.

However, because of how often credit checks are overlooked by doorstep loan providers, you are far more likely to take out a loan that you cannot afford, statistics suggest. If you miss a payment on a doorstep loan, there are no FCA guidelines restricting the amount you could be charged for that late payment. In some cases, this could lead to you finding yourself in debt which becomes quickly unmanageable as the result of a single late payment.

Doorstep loan versus personal loan – putting pressure on people to borrow more.

Because of the strict FCA guidelines, personal loan providers cannot put any pressure on you to take out any further loans or to take out a loan for more than you need. Every personal loan provider that we work with follows these guidelines very carefully and we always make sure that you can repay the loan before you take it out.

Unfortunately, the same cannot be said for doorstep loan providers. There have been some instances in the past few years where doorstep loan providers have pressured people into taking out loans (against FCA guidelines) that have gone unpunished. For this reason, we recommend that you stick to FCA-authorised personal loan providers which follow the rules.

Doorstep loan versus personal loan – apply for a personal loan with 786 Loans today.

If you’re looking to take out a personal loan, try 786 Loans. We only work with FCA authorised lenders so you don’t have to worry about predatory loan companies and loans that you cannot repay.

Because we’re brokers rather than lenders, it is our job to find you the loan that suits you best. We do this by showing your application to our wide range of UK based lenders.

All you need to do is fill out a single form that says how much you would like to borrow, how long you would like to borrow it for, and how you intend to pay the loan back. We will then conduct a credit check on you and send your application out to our network.

In an instant, we receive offers back from the lenders and then we present the one with the cheapest interest rates and the best terms for you.

To get started with 786 Loans, click here.

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