Doorstep Loans for Bad Credit

Updated: May 15, 2024 Author:

Key takeaways: Doorstep loans are not quite a thing of the past; they are out there, but some companies have moved part of the application and evaluation process online. If you look online for a doorstep lender, be careful who you are dealing with (all doorstep lenders must be FCA authorised) and what type of loan you are signing up for. Interest rates are very high on doorstep loans, and there may be better and cheaper options depending on your circumstances and individual requirements.

Do Doorstep Loans Still Exist? 

After the high-profile closure of long-established doorstep lender Provident Financial in 2021 after 140 years in business, it’s a reasonable question: are there still doorstep lenders in existence?

With the change in people’s financial habits (one of the reasons for closure cited by Provident Financial, although affordability complaints against Provident were another) and a high percentage of transactions being conducted online, isn’t someone knocking on your door once a week a thing of the past? Well, nearly, but not quite.

Finding a Doorstep Loan

There are very few doorstep lenders operating now. Of those that do, they will be local lenders, not national. As an example, Cockle Finance is a direct lender providing doorstep loans in certain areas around Essex. Cash can be delivered directly to you, and repayment options are available in person or by card. Loan amounts are from £100 to £1,000 loans with a maximum repayment term of 45 weeks.

Some online searches for doorstep loans will direct you to credit agents, intermediaries, or brokers; these are middlemen who work with a panel of home lending companies. They still offer cash loans and cash repayments on a face-to-face basis. Interestingly, one intermediary site we looked at offered doorstep loans arranged through a panel of three doorstep lenders, with none of them currently trading. You should know how many different lenders they approach, as each of these may conduct a hard credit search, which will affect your credit rating.

Understanding the ‘Alternatives’ to Doorstep Lenders

By considering how previous lenders in the doorstep lending space operated, and the rules in place today, we can glean a lot into how things should be done. Loans at Home was one of the UK’s biggest doorstep lenders, with a nationwide service and a long history dating back to its foundation in 1938. Loans started from £100 up to £600 loans with 14-34 weeks repayment periods. There was a quick online application process followed up with a call from an agent who would then visit weekly to collect payments if you opted for this service. With a lack of lenders offering doorstep collection services, more companies are advertising under the “alternative to” wording.

Some internet searches will direct you to lenders claiming to offer something better than a traditional doorstep loan; this will be online borrowing from the comfort of your home, typically represented as much slicker and quicker. Make sure you know what you are looking at. 

Several providers advertising under the terms “doorstep loans” don’t actually offer them. On these websites, if you scroll down to the smaller print, you’ll see the typical statement saying that they don’t offer doorstep loans but ‘alternatives.’ Be careful that this is not a Payday Loan in disguise. There seems to be a core of lenders using the perceived drawbacks of doorstep loans (such as unsolicited callers at your door who may not be regulated) as a marketing springboard to promote other types of borrowing.

If you apply online for a doorstep loan, ensure you know exactly who you are dealing with before revealing any sensitive personal information. Scammers are at work and can operate much more easily in this area under the disguise of a remote process.

All of the doorstep lenders that operated nationally have ceased trading. Those were the Morses Club, Provident Financial, and Loans at Home. Any broker claiming to apply to these companies will be up to no good because they no longer provide loans of any type. 

Staying Safe Online and at Home

If you need to lean on doorstep loan companies, perhaps because you don’t have a bank account to make repayments from, before applying, check on the FCA website to ensure they are authorised to either provide loans directly or broker a loan on your behalf. 

Doorstep loans are advertised online, but never at your door and that’s because it’s not allowed. Lenders must be authorised by the Financial Conduct Authority (FCA). The agents employed by them may not be registered but the company they claim to represent must be authorised. If anyone knocks on your door claiming to offer a loan, ask for their authorisation credentials. The only time a lender can offer a loan on your doorstep is after you have provided a written request, and that can be online. Many are, which is what you’ll see on the website – An eligibility checker. Check the terms when you agree to have a soft search done as someone may call or visit after you have agreed to a preliminary soft credit check. 

Pros and Cons of Doorstep Loans

Some people prefer the personal touch when it comes to borrowing money, and that’s exactly what a doorstep loan offers. The whole transaction can be carried out on a cash basis, from the amount lent to the repayments, and conducted entirely face-to-face. 

For borrowers who want to conduct most of the process online/remotely, this is also an option with some doorstep lenders. You can still benefit from weekly payment collections if you want or opt to pay online or via an app.

Doorstep loans work well for people paid in cash and borrowers who want to make weekly rather than monthly repayments. The whole process can be cash-based for those without a bank account. Doorstep lenders must run a credit check before any lending decision but are typically more lenient with people with a bad credit score, CCJs, or active bankruptcy.

However, one of the most significant disadvantages of doorstep loans is that interest rates will be much higher than mainstream/high street banks and organisations. Annual Percentage Rates (APRs) can be in the thousands. Doorstep lenders will justify the rates as being for the personal service and convenience of a loan in your home, but in reality, doorstep loans have always had higher interest rates, mainly because of the clientele’s credit situation. Most doorstep lenders target customers with low incomes, and in all likelihood, will have a poor credit history. 

What are the Alternatives to a Doorstep Loan?

  • Payday loans offer small amounts of money over a very short period, usually until your next salary payment date. Interest rates are very high. Be careful that an online search for a doorstep loan does not lead you down this road instead.
  • You can request an advance from your employer if they offer an Employee Salary Advance Scheme (ESAS), but your next salary payment will be short of that sum, so make sure you can still pay your regular bills. Some employers charge a fee for this service and limit the amount of times you can apply.
  • Government Budgeting Loans are an option for people on state benefits for six months or longer. Not all types of benefits qualify, i.e., Universal Credit.
  • Credit Unions can offer a more competitive rate for borrowers and will consider applicants with a bad credit history who can’t find finance elsewhere. However, you will need to join the Credit Union, and there may be a waiting period (commonly three months) before you can apply for a loan.