There are quite a few forms of bad credit loans available to those with….bad credit.There are:* Payday loans
There are quite a few forms of bad credit loans available to those with….bad credit.
* Payday loans
* RTO or rent-to-own
* Guarantor loans
* Doorstep loans
* Logbook loans
As you can see, there is a good variety of bad credit loans, and depending on your loan needs, one for you.
However, there seems to be a few less lenders in some of these types of loans, especially payday loans as Wonga, the largest payday lender in the UK, went bust a few months ago.
This raised the question for those still paying back a Wonga payday loan, do they still need to pay the loan back?
Of course the answer is yes, the loan still needs to be repaid.
Even though there are various different forms of bad credit loans, the FCA/Financial Conduct Authority, who regulates credit and lending, has been spending a lot of time investigating and reviewing various lenders, and forms of lending.
Including payday loans and rent-to-own stores/companies.
The FCA made changes in how payday loans could be granted, and also caps on the costs and number of times a loan could be rolled over.
The FCA also investigated RTO Brighthouse and in return the company is paying out almost £15 million in compensation.
Recently the FCA has imposed price caps on all rent-to-own companies, which come into affect next April.
This may severely limit the number of rent-to-own stores that stay in business, and just like many of the payday lenders before them, they may close up shop.
While protecting us as consumers, and those that may be vulnerable to being financially exploited, it is also limiting those with bad credit having access to a form of credit.
The Chancellor’s answer to this is to offer free loans to stop people from gong to high interest rate lenders. And it is one option, if it comes to fruition.
However, as one door is closed, another may open up, or in some instances, a door closes, and another open door, opens wider, such as with doorstep lending.
Doorstep Lending or Doorstep Loans
Doorstep loans are loans where the lender comes around to the borrower’s home, and grants them a loan. The loan can be from £100 to £1,000, and the lender then returns each week to collect the weekly payments.
It makes things easy for the borrower, and as they are considered a bad credit loan, credit scoring is not taken into account when granting the loan.
As a bad credit loan, the interest rates are high.
There are those that want the FCA to include the cap that is on payday loans and now RTO stores, to be extended to doorstep loans as well.
The government seems to back this cap as well, as Tory MP for Harlow, Rob Halfon stated,“loan sharks and rent-to-own companies are getting their teeth into the most vulnerable”.
“It’s outrageous that some of them will end up paying back double what they borrowed.”
“Capping these interest rates would leave hardworking people in Harlow and across the country safe in the knowledge that they’ll get a fair deal when they take out a loan.”
“The government has given the FCA the powers to bring in a cap to protect consumers from these companies. Now the FCA needs to side with consumers.”
The Labour Chief of the Business Select Committee, Rachel Reeves stated, “It is unacceptable that doorstep lenders and providers of rent-to-own goods are allowed to blatantly exploit people they know are vulnerable. By charging exorbitant interest rates and fees, they are only worsening people’s financial woes. The FCA needs to take urgent action to stop unscrupulous providers creating more misery.”
And Gillian Guy, Chief Executive of the CAB/Citizens Advice Bureau said, “People who use rent-to-own and doorstep loans are woefully unprotected from runaway costs.”
“Our research shows a cap on these loans would save people £185m and help stop debts spiralling out of control. The payday loan cap has been a remarkable success and led to a dramatic reduction in the number of people we see with problem debts from these loans.”
“The regulator must not miss this opportunity to give people a necessary safety net and extend the cap to rent-to-own and doorstep loans.”
It seems for now, doorstep lending is looking to fill a void left by some borrowers who may have used payday loans in the past.
So far, no word on a price cap on these types of loans.