A guide to doorstep and home credit lending

A doorstep loan is where you borrow money from an authorised lender who collects your repayments from your home. Doorstep loans usually come with high rates of interest compared to loans from a bank or using a credit card and are for smaller amounts up to £500. Doorstep lending is also called home credit.

1. They can’t call on you unannounced

Doorstep lenders are not allowed to call on you without your written permission. If you already have a doorstep loan from a home credit lender, they will still need your written permission to visit you to offer another loan.

2. They cannot sign you up to a loan on their first appointment

A doorstep lender must visit you at least once before signing you up for a loan. This is so you have time think about whether the loan is right for you and if you decide not to proceed you can refuse the second meeting. And, at any time during these meetings, you can ask the doorstep lender to leave.

3. You will usually pay your doorstep loan weekly or fortnightly

The doorstep lender will ask for a weekly or fortnightly loan payment. They can collect this from your house or you may be able to arrange to pay this from your bank account via a direct debit.

4. The loan payment is fixed

Just like any other loan, your payment will be a fixed amount each time. This payment will pay back a proportion of the amount you borrowed plus the interest.

1. Read the loan agreement carefully and take your time – do not be hurried to sign the contract.
2. Make sure you understand how much you are borrowing, the interest costs, how long you will be paying the loan back for and the amount you need to pay each week or fortnight.
3. Think about your budget and if the loan will make paying any other bills or credit commitments difficult.
4. Make sure the lender is clear with you about what will happen if you cannot pay your loan.
5. Look at what happens if you decide to pay back the loan early or withdraw from the loan within the first 14 days.

You should speak with your lender as soon as you realise you may have a problem paying your doorstep loan. The lender may be able to agree a new repayment schedule to help you manage the payments. If you miss a payment you should not incur a penalty, but this could impact your credit rating and limit your choice of credit in the future.

All doorstep and home credit lenders must be authorised by the Financial Conduct Authority (FCA). This means they will be listed on the FCA register. You should always check that your lender is authorised with the FCA, if not then they are acting illegally and are potentially a loan shark.

You will be allowed to pay back your loan early and receive a rebate on the future interest charges. There may be a fee to pay back your doorstep loan early, but this amount is capped by law.

Alternatives to doorstep lending include getting a loan from a credit union, a guarantor loan, using an overdraft or a credit card. 

Credit union

A credit union has a maximum rate of interest it can charge you – this is 3% per month or 42.6% APR.

A guarantor loan

If you are worried that you may not be able to secure a traditional loan, then a guarantor loan may be an alternative. While these charge higher rates than a loan not requiring a guarantor, they should be at lower rates than a doorstep loan. Use our loan eligibility check from Loans Warehouse to see which loans you are most likely to be accepted for.

An overdraft

An arranged overdraft should also be lower cost than a doorstep loan, as long as you stay within your agreed limit and do not incur any default charges. Look at bank accounts with overdrafts.

A credit card

A credit card is likely to be another cheaper alternative, as long as you make your payment on time and do not exceed your credit limit. It’s important you pay your credit card every month and reduce the balance held to stop interest costs building over time.

If you are struggling to pay your day-to-day bills, then you should consider if a loan will help you in the long-term. Read our guide 12 steps to get debt free or contact a debt advice charity, such as Step Change for help with managing your debt.