With many consumers unable to get their hands on an affordable loan due to the restrictions that have come about from the global credit crunch, many are turning to more expensive methods of trying to bridge the gap each month when they find that their income does not cover their outgoings. According to some officials many of those unable to get finance elsewhere due to poor credit or low incomes are turning to doorstep lenders and paying a fortune in order to borrow money.

An official from Provident Financial, one of the better known doorstep lenders, recently confirmed that profits were looking healthy, and the start of the year had seen strong growth in terms of business. However, officials are warning consumers to be careful about borrowing from doorstep lenders, as interest rates can be astonishingly high and the consumer is taking a huge risk by taking on one of these loans.

One official from the Housing Corporation recently said: “If you borrow from doorstep lenders, you risk the roof over your heads in return for a day’s happiness.”

Another industry official also warned consumers: “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.”

Consumers are advised to look at other alternatives if they need to raise finance, one of which is a local credit union. “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.”

Recent additions:

• Middle classes now struggling with loan repayments
• Overdraft popularity increases as loan accessibility is reduced
• Consider a credit union for your finance needs
• Lenders needs to be more careful on checking applicant information
• Is the First Plus special offer a good deal?
• Hikes in personal loan rates may mean credit cards are more viable option

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