Credit Building > What are doorstep loans?

What are doorstep loans?

Wollit Team4 minute read · Updated 1st July 2024

Doorstep loans, also known as home credit or home collected loans, are a kind of short-term personal loan in the UK where a lender's agent visits your home to deliver the loan in cash; they usually collect repayments in cash as well.

These loans are meant for people who want to borrow smaller amounts, typically between £100 and £1,000, repaid over a short period of time (12 months or less), and who don’t have a bank account or don’t want to use one.

How do doorstep loans work?

The process of getting a doorstep loan usually goes like this:

You apply online and use the lender or broker’s eligibility calculator. This will run a soft search on your credit file to see if you qualify for the loan.
If you’re approved, you’ll get a “decision in principle”.
If you accept the decision in principle, a loan agent comes to your home to sit down with you and see how much you can afford to borrow and what kind of repayment plan makes sense for you. They'll need to check your ID, address, income and run an affordability assessment.
If the agent approves your application, you may receive the cash immediately or within 24 hours. There's no need for a bank account as the money is delivered in person.
You'll repay the loan over a short period, up to 12 months, with the agent returning weekly to collect your repayments in cash.

Do I need a credit check for a doorstep loan?

Yes. All loans in the UK require the borrower to go through a credit check. This is the case regardless if it’s a credit card, a personal loan, or a mortgage.

Can I get a doorstep loan with bad credit?

Doorstep loans are actually meant mostly for people with bad credit. That doesn’t mean getting one is guaranteed. Doorstep lenders may be a bit more accommodating than other lenders if you have a poor credit score, but they will still check to see if you can afford to pay back the loan.

This matters quite a bit – doorstep loans have some of the highest interest rates we’ve seen, often going over 100% APR.

How much do doorstep loans cost?

Doorstep loans can be one of the most expensive ways to borrow money in the UK. Lenders view people who use doorstep loans as riskier to lend to, so interest rates are almost always very high.

Here are some examples we’ve seen:

Morses Club used to let you borrow up to £1500 for 52 weeks with a representative APR of 498.78%. They’ve shut down since November 2023.
Loans at Home offers up to £600 for 34 weeks with a representative APR of APR 466.4%.

These are absolutely terrible APRs, especially if you plan to take them for the maximum amount of time allowed.

Are doorstep loans safe?

All doorstep lenders must be authorised by the Financial Conduct Authority (FCA) and most will also belong to the Consumer Credit Association (CCA).

You should always check that a lender is FCA authorised before applying for any loan by looking them up on the FCA register. And when a loan agent visits your home, always ask for ID to check that they’re a legitimate representative of the lender.

Also, keep in mind that doorstep lenders must follow very clear rules:

They’re not allowed to pressure you into taking out a loan;
They must also give you time to think about whether it's the right choice for you.

This means that you should be cautious of anyone who approaches you offering a loan, as they may very well be a loan shark, which could have serious consequences.

How do doorstep loans affect my credit score?

A doorstep loan will impact your credit score in a few ways:

First, the initial credit check will be recorded on your credit file and will lower your credit score for a few months.
If you repay the loan in full and on time, it could eventually build or improve your credit score, just like any other loan or line of credit.
However, if you miss payments or regularly pay late, it will quickly harm your credit score.

This is why it's important to think very carefully about whether you can realistically afford the repayments before taking out a doorstep loan, as missed payments can lead to additional fees and further damage to your credit rating.

What are the best alternatives to doorstep loans?

While doorstep loans can be a convenient option for some people, they are a really expensive and risky way to borrow money.

If you need to cover short-term cash flow problems, here are some better options:

A regular personal loan from a bank or credit union. You might be eligible even with bad credit, and will almost always be able to get a lower interest rate.
Get a credit card. If your credit isn’t good enough, you might be able to qualify for a credit builder card. Just make sure you can pay off the balance quickly to avoid high-interest charges.
If you’re on benefits, you might be eligible for an interest-free loan from the UK Government.
If you’re employed, you can ask your employer for an advance on your salary.
Or you can even borrow from friends or family. No credit check, no interest rate (usually).

Any of these options is better than a doorstep loan. Doorstep loans should be a last resort due to their extremely high costs and risks.

Finally, you should also work on improving your credit score so you can become eligible for better, cheaper loans.Luckily, now there are many apps that can help you build and improve credit.

One such app is Wollit. Wollit is an app available both on Android and iOS, and it works by reporting a fixed-fee monthly subscription as a loan repayment to all three credit reference agencies.

This keeps you safe from high interest rates or unexpected fees. More importantly, it also gives you a chance to build your credit history and improve your credit score which is the only solution if you want to get access to better and cheaper loans.