With the global credit crunch still in full force in the UK there is no doubt that many consumers are finding it increasingly difficult to get their hands on affordable finance, and in some cases any sort of finance at all. Lenders have really tightened up on their lending criteria, and the tighter credit conditions in place mean that many people, particularly those with low incomes or bad credit, could find it impossible to get finance from a mainstream lender.

These increased difficulties have resulted in financial disaster for many people, and some have turned to more desperate measures in order to get the money that they need. This is where a group of lenders known as doorstep lenders have stepped in, and one doorstep lender recently announced that business had been booming since the beginning of this year, indicating that an increasing number of people may have been turning to doorstep lenders to get the money that they are after.

However, consumers need to be extremely wary about going through doorstep lenders, and this is because these lenders are known to prey on those with little chance of getting finance elsewhere because of their income levels or credit rating. This gives the doorstep lender the leverage to change astonishing rates of interest, which many do, because they known that the consumers that they target have little option other than to do through them for a loan.

Many people have found themselves plunged into spiralling debt because of the high rates that doorstep lenders charge on borrowing, and some have faced losing their homes or other assets for the sake of borrowing a small sum or money at a huge rate of interest. Industry officials have been warning consumers to steer clear of these doorstep lenders and instead look at other possible solutions such as a local credit union, where small loans are made available at extremely low rates of interest.

One industry official recently stated: “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.”

Warning against doorstep firms another official said: “If you borrow from doorstep lenders, you risk the roof over your heads in return for a day’s happiness.” A second official agreed, adding: “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.”

Whilst the global credit crunch has undoubtedly made things more difficult for many consumers, there may be other options open that many have not considered, and this is something that should be done rather than turning to costly doorstep lenders.

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