Home credit

Home credit usually involves loans of up to £1,000 in cash. 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 debt.

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.

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 around 300% interest. This is compared with borrowing on a credit card that charges a higher-than-average interest rate of 38%.

You might also have to pay admin (or ‘arrangement’) fees with a home credit loan.

Home credit can seem tempting if you need money and have a poor credit score, but there are alternatives: 

• Salary advance – this is an employee benefit that involves taking some of all or your pay before payday. 
  
• Credit unions – might be an option if you have a low income and you need to borrow a small amount for a short time.
• Community Development Finance InstitutionsOpens in a new window – offer loans to people who struggle to get credit, but their interest rates tend to be higher than credit unions.
• Bank overdrafts – if you keep within the limit and don’t get default charges, this will be cheaper than home credit. Interest rates can still be around 40%, so it’s important to pay it off as soon as possible.
• Credit cards – will also be cheaper than home credit, as long as you make the minimum monthly payments and don’t get late payment charges or go over your limit.

It’s important to make sure you’re getting all the benefits you’re entitled to.

If you’re getting certain benefits, you might be able to apply for an interest-free Budgeting Loan.

Other help might be available from your local council. Find out more in our guide Universal Credit advance payments and other help.

Find your local councilOpens in a new window on GOV.UK.

It’s a good idea to shop around before you sign up to an agreement.

LendersCompared is an independent website that helps you compare the costs of home credit loansOpens in a new window And remember to compare these costs with the alternatives we’ve listed.

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).

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. 

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. 

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 to 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.

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.

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.