Urgent warning about high-cost loans as dad-of-four pays £820 interest on £1,000 debt – how to avoid it
DAD-OF-FOUR Stuart McGinley has warned others to avoid doorstep lenders after he paid £820 interest on a £1,000 loan.
In 2018 he took out two £500 loans, one from doorstep lender Provident and the other from Morses Club.
But in just 12 months, he'd paid back £820 in interest on top of repaying both of the original £500 loans.
"At the time I felt I didn't have a choice," 50-year-old Stuart told The Sun.
The year before, Stuart had quit his job selling broadband for BT to become a full-time carer for his wife Samantha, 42.
She has Vasovagal Syncope, non-epileptic attack disorder and non-epileptic dissociative seizures - a rare set of conditions that means she suffers from regular fits and blackouts.
Get your money back on track
";She needs someone with her all the time," Stuart explained.
'I didn't have a choice'
Until 2017 her dad Brian, 68, had been taking her to hospital appointments, but he was losing his sight.
And Samantha's mum Rosemary, 64, has bad arthritis.
"My father-in-law couldn't drive anymore and there wasn't anyone else," Stuart said.
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"I had to give up work to look after her."
The couple lives in Jarrow, South Tyneside, along with their 22-year-old son, 16-year-old daughter and twins aged 12.
After leaving his job, Stuart and his family relied on benefit payments to pay for everything.
Stuart claims Enhanced Jobseeker's Allowance and Carer's Allowance while Samantha receives Personal Independence Payments.
"That was okay until the council put us in a different house," Stuart said.
"They said it was safe to be in but it was in really bad condition and infested with cockroaches. There was no way I was going to let my kids stay there."
They left.
"It was a nightmare," said Stuart.
"We ended up having to put our stuff in storage and stay with my wife's sister and her kids but there just wasn't room for all of us."
Then they moved to stay with Rosemary and Brian but very quickly, the family couldn't afford to make ends meet.
'We really needed the money'
Finally, Stuart resorted to taking a doorstep loan.
"They would come and put leaflets through the door," he said.
"You'd see them around the place and you'd get phone calls all the time."
At first, having the extra cash was a big help.
"But then over months and months, it was just so much money and it was really stressful. I would never do it again."
He described how the same "customer support associate" would come to the door every week to collect.
"We were paying £35 a week for the two loans. It doesn't sound a lot but it's the interest that is so expensive," said Stuart.
"And it's the same guy every week so all your neighbours know your business. They're really persistent. It wasn't nice."
How do doorstep loans work?
Doorstep lenders offer customers with bad credit cash loans, usually between £200 and £1,000, though some will go up to £1,500.
Most doorstep lenders insist that customers pay back the loan over a minimum of 39 weeks up to a maximum of 52 weeks.
Although Provident has now stopped trading, Morses Club and other doorstep lenders will still hand out cash in exchange for a huge amount of interest.
For example, if you borrowed £500 from Morses Club today, you'd pay £23.70 a week over 39 weeks.
You can't pay the loan back sooner than this, so in total the minimum you pay back is £924.30.
This is because the annual percentage rate (APR) is an eye-watering 498.78% compared to a typical credit card APR of around 28%.
A personal loan from one of the big banks or building societies comes with an APR as low as 4.8%.
But to qualify for a credit card or personal loan, you have to have a good credit score.
The Sun contacted Morses for comment.
We first called for an end to rip-off interest rates charged by doorstep lenders in 2018.
Cheap alternatives to doorstep loans
While doorstep lenders may feel like the only option for some, it's important to know about other alternatives.
There are cheaper cash loans available - even if you have bad credit.
In Stuart's case, he could have saved money by going elsewhere.
Community lenders and social purpose lenders and credit unions will almost always charge much less interest and let you pay back over a longer time if you need to.
That's because they're not looking to make any profit - unlike doorstep lenders.
Some of these include Fair Finance, Fair for You, Five Lamps, Lancashire Community Finance, Moneyline, Salad Money and Scotcash.
Never again
The next time Stuart needed money quickly, he refused to go back to doorstep loans.
"I wasn't going to sit back and let those lenders take even more money off me," said Stuart.
So in 2020 when the family car broke down and had to be sold for scrap, Stuart began to look online for cheaper alternatives.
He found Conduit.
"I hadn't heard about responsible lenders before and it was only once I got through a bit of the application process and started speaking to someone that it became clear they had this social mission," he said.
He agreed to borrow £1,150 to pay for a replacement car and pay it back over a year.
"I was paying back less than before on a bigger loan," said Stuart.
In total he made 52 weekly payments of £31.60, working at out £1,643.20 in total.
"It's cheaper and far easier," said Stuart.
"The money just goes straight out of my bank so I'm not stressed when people come to the door."
Although lenders such as Conduit charge a lot more interest than the big banks, it's typically less than half what you'd pay a doorstep lender.
Conduit's APR is 217.5% so borrowing £1,000 over a year would cost £723.12 in interest, just under £100 less than Stuart paid Morses and Provident.
You're not alone
Lauren Peel, head of markets at Fair4All Finance, told The Sun there are millions of UK adults who are in financially vulnerable circumstances.
"Financial safety nets such as credit cards charging an affordable rate, overdrafts or savings are often out of reach for the most vulnerable," she said.
"They may feel forced to choose between going into arrears on rent or bills, living without essential items, or borrowing from high-cost lenders or loan sharks - all options which leave them worse off.
"It's more important than ever that people know about all the options available to them."
The community finance sector is made up of credit unions and other responsible lenders and will charge lower interest rates even if you have a poor credit history.
Lauren added: "As social purpose organisations, they have your long-term interests at heart and will only lend to you if it’s responsible to do so - and if they can’t they may help you find other solutions."
To find a responsible lender when the bank can't help, have a look at FindingFinance.org.uk.
You can find out which credit unions you may be able to join at FindYourCreditUnion.co.uk.
How to get help if you're struggling
A range of cost-of-living support is available. You can visit the for more information.
As part of the support being given, millions of households across the UK will automatically receive a £301 payment from the Department for Work and Pensions (DWP) between April 25 and May 17.
The payment reference for bank accounts will be “DWP COLP”, along with the claimant’s national insurance number.
It is the first of three payments, totalling up to £900, for those eligible and on means-tested benefits, such as universal credit or pension credit, in 2023/24.
Welfare Assistance schemes
Many local councils have Welfare Assistance schemes to help struggling families.
Help available varies, but you could get free cash, food vouchers, and help for bills like rent and energy.
Check with your council to see whether you are eligible and what you can claim.
Household Support Fund
This is another scheme you can access through your local council.
It's designed to help those in most need with payments towards the rising cost of food, energy, and water bills.
Check with your council directly to see what's on offer as some share money with charities which can then give you cash or food vouchers.
Some councils restrict how often you can apply for money through this scheme to once a year, so double-check.
Check your benefits entitlement
Even though the government is stopping much of the cost of living help currently on offer, some people will still be able to get financial support.
If you claim pension credit, income support or Universal Credit you may be entitled to further cost of living payments.
Depending on other tax credits or benefits you already get, you could get either three or five further payments.
You can find free-to-use online benefits calculators to work out what you're entitled to.
Entitledto's free works out whether you qualify for various benefits, tax credits and Universal Credit.
Debt charity also has a benefits checker which is free to use and won't record your results.
Make sure you have key financial information to hand, such as bank and savings statements, and information on pensions and existing benefits.
If you live with a partner or family, get their basic financial information together too as this could affect your claim.
Contact your provider
All energy suppliers, mortgage lenders and other essential services providers will help you if you're struggling to keep up with bills.
Every company has a different policy but it's always worth contacting them directly to ask for help - either from a hardship fund or by giving you more time to pay.
Even if you're not in trouble yet but you're worried you might be soon, call your energy company, broadband provider or lender to get a plan in place.
Free and confidential debt advice
There are several charities and services that offer free help and advice if you're worried about money.
It's always best to contact one of these services before thinking about debt consolidation or using a debt adviser who will likely charge you.
Citizens Advice is a free and impartial service which will help you come up with a plan to get on top of your debt including which payments to prioritise and how to reduce your living costs.
The organisation's website has a on many aspects of debt, but you can contact them directly by phone, online or in person for more personalised help.
StepChange is another free advice service offering support and guidance online or over the phone, and it's completely confidential.
You'll need to provide details of your debts, income and household spending to get a clear picture of where your money goes.
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Where possible, their advisers will help you come up with a plan to repay all your debts but in a way that you can afford.
National Debtline is a charity run offering free and confidential advice to people in England, Wales and Scotland.