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Loans glossary

Doorstep loans

Doorstep lenders (also known as home lenders) offer small loans and then collect the repayments from the customer's house.

They provide easy access to credit that many of these customers would not have elsewhere.

The typical size of a doorstep loan is £300, with 2.3 million people taking out such a loan in 2004 at a cost of £1.9 billion.

Customers of doorstep loans are more likely to be young mothers, living in social housing, and on low incomes.

However, customers are charged, on average, nine per cent more than they should be because of a lack of competition in the market, according to a Competition Commission provisional report.

The Competition Commission also offers up possible explanations for the high cost of doorstep lending.

It points out that the method of collection is expensive and the risk of bad debt high, and there are barriers to expansion in the market, limiting competition.

And many home credit customers like having their payments collected at their home, and value their relationship with the agent rather than seeing it as exploitative.


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