While the government have been very proactive of late in regulating the so called "door step" lenders these companies are still active in many parts of the UK - predominantly areas of poverty and lack of finance. While these "door step" lenders offer a personal approach to lending by visiting you at home, some of the rates and penalties which they charge are enormous. A small loan can soon become a larger unpayable loan with the borrower paying back many times the initial capital received.
Why are "door step" lenders so popular$%:
The lenders usually target areas of the country where the residents would not normally be able to obtain traditional funding from the main stream banking fraternity - maybe they are unemployed, have no assets or are in financial trouble. These are the perfect borrowers for these types of loan companies.
Active examples:
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The problem seems to be that initially the finance is easily obtained from these companies, although as the customer gets more and more into debt, it becomes harder and harder to cover payments. Christmas can also be an expensive time of the year, with many people either taking out further finance or deferring interest payments.
Deferred interest payments can be very expensive with fines for non payment, and very often an increased interest rate, as well as interest on the interest which has been deferred.
What can be done to restrict the often excessive interest rates$%:
Certain instances
The government have recently issued a number of bills which restrict the charging structure for the sector as a whole, and this is especially aimed at the "door step" lenders - but is it working$%:
Unfortunately it has been shown that some companies are not adhering to the new regulations, and the borrowers are not really in a position to complain as finance is often essential to support their families.
What can be done to help the situation$%:
While traditional banking finance is not always an option for some of the customers mentioned above, there are various government grants and government agencies offering assistance.
While these agencies may take a while to organise the finance required, in the long term it is a more favourable option than a life of rising debt.
In a world where personal debt is at record levels it is essential that certain areas of society are offered protection from uneconomic rates of finance. It is proving a little more difficult that initially hoped, but there are signs that it is slowly having an impact.
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