Doorstep Loans vs. Traditional Bank Loans: Which One Fits Your Needs?

In times gone by, borrowing money from a bank was not a cinch. A lot of paperwork and strict criteria would make it hard for people to qualify for a loan. Those who managed to get the nod often would find themselves saddled with debt, losing their valuable asset.

Over time, the lending criteria became slightly flexible bringing opportunities to direct lenders to come in and take hold of the market. Online lenders eventually became popular as they removed all obstacle courses, such as tedious paperwork and collateral requirements. They even introduced the concept of small emergency loans. Even if you need a sum of €100, you can apply for a loan from them. All that convenience you cannot get from traditional banks.

As the online lending industry evolved, many lenders introduced doorstep loans in Ireland. They became popular among people who needed money for emergencies. Because a lender’s representative calls on your house to hand in money, they are also called home credit loans. However, a few lenders were up to providing these loans. Now, you will find a couple of lenders providing home collection loans.

What to know about doorstep loans?

Doorstep loans are very small loans particularly aimed at funding small emergency expenses. The representative of your lender will hand in and collect money on your doorstep. Bear in mind the payment will be made in full, which means you are free from your debt obligation once you have paid it off.

Doorstep loans may or may not be better than traditional bank loans. First, you need to understand that traditional loans to meet small emergencies do not exist. So, no banking institution will ever fund your small needs. In order to gain a competitive edge, some banks have begun providing emergency loans. However, you must have a good credit rating. Banks do not trust bad credit borrowers, and therefore, they refuse them for a loan.

Doorstep loans are only available from direct lenders. You do not compulsorily require a good credit rating to get the nod for these loans. Such loans are mainly popular among bad credit borrowers, and therefore, high interest rates are levied.

The repayment length of doorstep loans is very small. On no account can it be more than a month. It can be quite challenging to pay off the debt. They charge a high amount of fees because of doorstep services.

• Doorstep loans can provide you with immediate cash.
• They are particularly a good option to meet unexpected expenses.
• They are expensive and quickly add up in case of late payments.
• They do not improve your credit score, nor do they build your credit history.
• Missed payments and defaults can lower your credit points.

Should you consider other alternatives?

As you know, doorstep loans are particularly available from direct lenders; you do not have a choice. Hardly any bank may provide you with similar small loans despite a bad credit rating, but they make no difference in terms of interest rates being charged.

Financial experts always suggest doorstep loans should be avoided because they may cost you additional fees due to doorstep services. You should carefully compare the annual percentage rate to check your affordability for them.

You should avoid using these loans if you are sceptical about your repaying capacity. There are some other loans you can consider using when you are in need of money to help tide you over.

• Bad credit loans

Bad credit loans are ideal to fund your emergency needs. Unlike doorstep loans, you cannot get money handed in on your doorstep. The money will be transferred to your bank account after the completion of the loan application process.

• Bad credit loans are cheaper than doorstep loans because lenders make a hard credit check to determine your affordability.
• You might be able to borrow slightly more money provided you can repay them.
• Bad credit loans offer flexible payments. You can choose between weekly and monthly instalments. It will be much easier to manage the debt payments.
• These loans can help improve your credit history if you pay all instalments on time.

Loans with bad credit also carry high interest rates, but they are still more affordable than doorstep loans.

• Unemployed loans

Home collection loans are particularly popular among the unemployed. You do not need to have a bank account because you will receive and pay back money to the representative on your doorstep. But you should avoid them because of the hefty fees. You can rather take out unemployed loans if you need money to tide over due to a job loss.

• You can use unemployment benefits and side gigs as your income.
• Interest rates will be competitive.
• Some lenders may offer you flexible repayment plans.

You should carefully compare the rates offered by different lenders, so you pick the best deal.

• Quick loans

You can also consider using quick loans. The approval process for these loans is high because quick loans are subject to soft credit checks, which means you will not lose your credit points due to soft inquiries. They do not appear on your credit report and cannot be seen by other lenders.

• Quick loans are personalised.
• They carry lower interest rates than doorstep loans and no credit check loans.

You should talk to an Irish money lender to discuss your options so you choose an affordable loan to meet your unexpected expenses.

The bottom line

Traditional banks cannot lend you money to meet small emergencies, so you will have to turn to direct lenders to borrow money. There are various other alternatives to doorstep loans such as quick loans and bad credit loans.

You should carefully compare the cost of each loan option and then choose the one that best suits your requirements. Do thorough research and take advice from experts.