Home credit is where you borrow money and the lender comes to your home to collect the payments. Also known as doorstep lending, it’s best avoided if you have other options as it’s often very expensive.
How home credit works
Home credit usually involves loans of up to £1,000 in cash with interest charges of as much as 300%. Most are repaid in under a year by weekly instalments, which are collected from your home.
It might be tempting to turn to a doorstep lender if you have bills you can’t pay, but borrowing at such a high interest rate could increase your chances of falling into debt as it’s more likely to become unaffordable.
It’s important to make sure you can afford to keep up with repayments before considering this, or any other, type of borrowing.
Find out more about how to make borrowing money work for you in our section Managing credit well.
What home credit costs
Home credit has a much higher interest rate than a bank loan or a credit card. For example, if you borrowed £200 for a year from a doorstep lender, it’s likely you’d pay as much as 300% interest. This is much higher than even an expensive credit card which would typically have an interest rate of about 38%.
You might also have to pay admin (or ‘arrangement’) fees with a home credit loan.
Alternatives to home credit
Home credit can seem tempting if you need money and have a poor credit score, but there are alternatives.
If you’re facing higher living costs, find out about extra sources of income and support in our section Help with the cost of living
If you decide to take out home credit
It’s a good idea to shop around before you sign up to an agreement.
Make sure the lender is authorised
All home credit lenders must be authorised by the Financial Conduct Authority (FCA)Opens in a new window If they can’t provide proof that they’re FCA authorised, it’s likely that they’re a loan shark.
Many lenders are also members of the Consumer Credit Association.
Watch out for scams
A loan company will never ask you for an upfront payment before they give you the loan. If you think you’ve been approached by a scammer or unauthorised firm, report it to the FCA Opens in a new window
Rules for home credit lenders
Home credit lenders can’t legally contact you or cold call you to offer a loan. If you want to take one out, you must tell the lender first – setting out your request in writing before they can visit you to discuss the details.
The same applies if you already have a loan with the home credit lender and you’re thinking about getting another one from them (this is called refinancing if you’re using the new loan to pay off the old one).
The agent must arrange a separate visit and get a written request from you outlining the details of what you’re looking for. You then have time to change your mind about the visit, without feeling under pressure.
Also, if they do arrange a separate visit to discuss another loan, they must explain to you – in a way that you can easily understand – what the costs are of refinancing any existing loan compared with taking out a new loan. They must also give you this information in writing.
This is so that you can consider the costs of what you’re being offered and shop around to compare them with other types of borrowing.
During the visit, you can change your mind at any time and ask them to leave.
Paying back home credit
The money you borrow under a home credit loan is usually repaid weekly or fortnightly to an agent who comes to your home.
If you prefer, you might be able to arrange to make a payment from your bank account instead.
As with any other type of borrowing, it’s important to:
- always take the time to read and understand the contract – don’t be afraid to ask questions or get a second opinion
- be clear about the amount you're borrowing, for how long, and how much you’ll have to repay both each week (or other period) and in total
- make sure you understand what could happen if you can’t keep up the repayments.
As with personal loans, the amount you pay in interest is included in your repayments, so you repay a fixed amount each week.
There aren’t usually penalties for missing a repayment. But if you’re having problems, make sure you tell your lender as soon as possible as they might be able to come up with a more affordable repayment plan.
They might offer you a top-up loan or extend the length of the loan. If they do, it’s important to ask how much extra this will cost you and be sure you can afford it.
The lender should carry out an affordability check to ensure you can manage the repayments. If they don’t carry out this check, you might be entitled to a refund and should complain to your lender. Find out more in our guide How to complain to your bank, lender or card provider.
Have you missed a payment?
Use our Debt advice locator tool to find free and confidential debt advice online, over the phone or near to where you live.
If you want to pay your loan back early
You can repay your loan early at any time, in full or part, and you’ll be entitled to a rebate of future interest charges. But this might not be a full rebate.
Your lender might still charge you interest for a certain period of time, depending on how long is left on your credit agreement. The amount you can be charged is capped by law which means you will never pay more than 100% of what you borrowed in interest.
Details of your right to repay early, or to withdraw from the loan (within 14 days), should be in your credit agreement. It’s important to read this carefully before you sign up.