Doorstep loans, also known as home credit, are unsecured loans which can be taken for smaller sums of money. The borrower can get the money delivered at their doorstep by an agent who will come to collect the repayment instalments, usually on a weekly basis. Interest for these loans is calculated on pre-set rates and the loan amount is disbursed in one or two days. These loans have minimum eligibility requirements.
The interest rates on these loans are rather high. The representative APRs are generally upwards of 100%, and in worst cases can be as high as 1,500%, which signals repaying a lot more than you actually borrowed. The repayment tenures generally range from 14 weeks to 52 weeks. APR stands for Annualized Percentage Rate, which is an indication of the overall interest you will pay to the lender in a year. However, APR does not necessarily provide an accurate description of the overall interest, as most of the doorstep loans are for smaller tenures. For instance if you repay the credit within 14 weeks, the overall interest that you paid will be lower than the APR, which is calculated if your extend the repayment tenure throughout the year.
Doorstep loans also do not include any late charges or penalties on skipping a payment. Also, the extra interest won’t build up as with every repayment, the loan amount gets reduced by the amount you've repaid. These loans also include fixed rate interests to give you clear figures for repayment.
There are minimal documentation requirements when applying for a doorstep loan. In general, you have to submit the following documents to the credit agency:
Some providers also seek information on your current account apart from a valid debit card. These documents should be enough to get you going with the doorstep loan application. Ideally, these should be enough for your application, but you may have to furnish other documents pertaining to your finances if your provider so seeks.
There are a few companies that provide doorstep loans to unemployed people, however some companies may reject your application in such cases. This is because the loan provider does not see a viable option in disbursing loans to you as you are in a risk of defaulting for extended periods of time. You can still explain your current situation to the loan agent and they may consider your application. Doorstep loans are generally informal loans, and as unemployed people might also get their applications processed.
The credit check process of a doorstep loan is very informal. These are amazingly flexible loans, wherein the decision to disburse a loan to you is not entirely based on your credit history. The final decision for the loan approval depends on your existing situation as well as your ability to make the regular repayments comfortably in future. As such, the lenders tend to focus on your future abilities for repaying rather than your past credit history, which can be a relief to a lot of people looking for unsecured personal loan of small amounts. At most, the loan agent will conduct a cursory evaluation of your past credit history.
These loans are ideally suited for people with bad credit history. As discussed above, only a rudimentary check of your credit history is done by the lender. And this credit check is more of a standard procedure than a real issue when disbursing loans. The loans are provided on your ability to make regular repayments, rather than how you handled your finances or credits in the past. And being smaller loans, a credit history doesn’t make much of a difference in ascertaining your repayment capability.
Doorstep loans are delivered by agents in your locality who provide a personal touch to the whole lending process. The agents are entrusted with analysing the customers’ requirements and offer credit as per their needs. All this is done as a ‘doorstep service’ where the borrower gets the money delivered comfortably to their residence. The credit agency will understand your particular requirements as well as your circumstances, allowing you to borrow only the amount you are certain you can repay without too much burden on your finances.
Repayment of doorstep loans is done after you decide on the tenure for repaying the loan. Once you reach an understanding with the credit provider, an agent will come to your house every week to collect the pre-decided instalment for the repayment. What’s more, if you are unable to repay an instalment, the agent can help you with further financial planning and you may get leeway while missing a payment.
The instalments are calculated for both the principal borrowed amount, as well as the accruing interests on the loan. The weekly instalment that you have to pay includes both interest and principal, where the interest is calculated on pre-decided fixed rates. This gives you a surety of the amount that you have to repay, so that you can accordingly borrow and repay the amount.
Loan amounts in doorstep loans are generally low. For instance, in the UK first time doorstep loan applicants are offered credit up to £500. Repeat borrowers may be offered higher credit to the tune of £1,000. The smaller amount makes this loan an attractive choice for people simply looking to pay bills or go for a local holiday. Ideally, a doorstep loan should be opted only when you have exhausted other means of credits such as bank loans.
The whole process can be completed within 3-5 days at most. Once you have made an inquiry on the phone or online, the lender will send a representative to your house. This person will ascertain your financial position, your requirements and collect all the required documents. The loan will be disbursed on the very next day if the process is complete and your documents are found to be in order. Moreover, when you have decided the frequency of repayments, the same representative may come every time to collect the money from your home.
Doorstep loans are currently not offered in India. However, you can opt for doorstep servicing from banks such as Axis Bank, HDFC Bank, ICICI Bank, IndusInd, Kotak Bank etc. who provide doorstep services wherein a representative from the bank can be called to your house to get information and complete formalities for various banking services. You can check out BankBazaar.com for a full list of banks in your area who provide easy banking services such as doorstep collection. Furthermore, you can also compare and apply for different products such as personal loans, home loans, car loans, fixed deposits, credit cards etc. online from the comfort of your home.
A GST rate of 18% will be applicable on banking services and products from 01 July, 2017.