5 biggest myths about provident loans in Ireland

Provident loans in Ireland are doorstep loans. In other words, they are emergency loans aimed at financing unforeseen expenses. Doorstep loans, technically, are small payday loans. They are called doorstep loans, as the money is offered on your doorstep.

Doorstep is a service. This service has been designed to help:

• The unemployed
• The retired
• The disabled

The application process for these loans is the same as payday or any other small emergency loan. You just need to complete the application form online, letting your lender know about your income and expenses.

After the approval, one of the representatives of a lender will call you to schedule a meeting in the comfort of your home. The representative will call on your house to hand in the money. The representative will also come to your doorstep to collect money.

The doorstep service exclusively benefits those who do not have a functional bank account.

The biggest myths about provident loans in Ireland

Provident loans in Ireland have become very famous loans. But there are certain myths that must be debunked.

• These loans involve a hard credit check

Emergencies can crop up at any time, and they can also affect bad credit people. Most of the loans are approved after the perusal of your credit check. After a credit check, hard search footprints show up on your credit report.

These hard inquiries can pull your credit points, and they will show up on your credit score for up to 2 years. However, provident loans do not involve a hard credit check. A lender will run a soft credit check that does not leave any hard search footprints.

A soft credit check is run to protect your credit score from going down. Emergencies can catch you by surprise even if your credit score is not so good. “When your credit rating is bad, you will certainly want to get a loan without a credit check, so you do not have to face further damage to your credit rating.”

This is why a soft credit check is run. A lender will make a lending decision based on your income. You should have a strong income to be able to qualify for these loans. A soft credit check cannot help a lender to know your previous defaults. They will get to know only your credit details.

• Provident loans are expensive

Many borrowers assume that provident loans are expensive. They can throw you into a debt trap. However, the fact is that provident loans in Ireland are not that expensive. They are not aimed at trapping credulous customers into a debt trap.

These small emergency loans carry slightly higher interest rates. This is because the lender does not have an idea about your previous defaults. Since you are not keen on a credit check, the lender will automatically assume that your credit rating is very bad.

Despite higher interest rates, you will likely see that they are manageable. Responsible lenders do not aim at trapping you into debt. However, there are private loan sharks in Ireland known to charge outrageously higher interest rates. Beware of such loan sharks.

If you borrow money from them, you will end up with a never-ending cycle of debt.  Your credit score will become so bad that you will never be able to borrow money down the line even in emergencies.

• Provident loans are long-term loans

Some borrowers think that provident loans are long-term loans. However, the fact is that they are short-term loans. You can use them only for emergencies. Here are some of the reasons what you can use these loans for:

• If a device is to be repaired
• If you need to buy something
• If you are unemployed
• If you have got medical bills
• If you have got unexpectedly higher energy bills

It is worth bearing in mind that you are not allowed to use these loans for a purpose that is not urgent. It does not make sense to borrow money for frivolous purchases. You can use these loans in case of being out of work, but you must have a passive income source to prove your repaying capacity. Here are the income sources you can use as your passive income:

• Unemployment benefits
• Pension
• Rental income
• Dividends
• Interest income
• Windfall
• Monetary gains
• Child support allowances

You can use all or some of them as your income source.

• Provident loans can improve your credit score

As provident loans are small emergency loans, they are paid back within a month in full. There are a few lenders that will allow you to pay down the debt in weekly instalments. Well, it does not matter whether you are to pay in full or in weekly instalments. Under both circumstances, you will see no improvement in your credit score.

Provident loan lenders do not inform payments to credit reference agencies. So, no record of timely payments will show up on your credit report. However, it is crucial to note that default can take a toll on your credit rating.

In case of a default, they may send your account to collection agencies. Chances are they will report credit reference agencies about your default. This will stay on your credit file for up to six years. It will worsen your credit score.

• Provident loans carry hidden fees

Provident loans do not carry hidden fees. All terms and conditions are explained clearly so you do not face any complications later. A breakup of cost is explained in the loan agreement that clearly tells you how much you will have to pay.

The takeaway

Provident loans in Ireland have some myths that must be debunked. These small emergency loans carry lower interest rates. They are particularly aimed at bad credit borrowers. Handing in or collection will be done on your doorstep.