Doorstep lenders could spell financial misery

Industry officials are warning borrowers who are thinking of turning to doorstep lenders in a big to try and get the finance that they need to think twice, as these extortionate loans could spell financial misery for those with limited incomes.

Many people now find it difficult to get finance from mainstream lenders due to the tighter credit conditions stemming from the global credit crunch. Potentially this could see a rising number of people on low incomes or with bad credit turning to doorstep lenders.

One industry official said: “If you borrow from doorstep lenders, you risk the roof over your heads in return for a day’s happiness.” Another added: “Doorstep lenders exploit poor families’ inability to get credit from more mainstream lenders, and they cover their risk in lending to the less well off by charging punitive interest rates.”

One official said that credit unions could provide a better solution for many, stating: “Credit unions offer a great alternative to money shops and payday loans for people needing small loans over relatively short periods. Credit unions charge no more than two per cent on the reducing balance of a loan and many charge just one per cent, which would mean that £1,000 taken out for a month and paid back weekly would accrue just £5.76 in interest at one per cent.”