Other borrowing
Sub-prime lenders
Sub-prime lenders are licensed lenders who are willing to make loans to people who are unable to get credit from mainstream lenders because of a poor credit record. They often charge a much higher rate of interest than banks and building societies.
Doorstep lenders (sometimes known as ‘home credit’)
Money lent to you by ‘doorstep lenders’ (such as salespeople who come and knock on your door) can be expensive. If you do consider taking out a loan from them, then as well as checking the APR, you should:
- ask to see their lender’s licence or other authorisation. If they don’t have one, they are operating illegally, so don’t use them;
- be clear about the amount you are borrowing, how much you must repay and for how long you will be making repayments;
- ask how much in total the loan is going to cost you;
- make sure you understand what will happen if you can’t keep up the repayments.
Loan sharks
Loan sharks are unlicensed lenders. They operate illegally and will lend you money when nobody else will, but:
- their rates will be very high and you may find it difficult to keep up the repayments;
- you may be forced to get a second loan to pay off the first, causing your debts to spiral out of control;
- they may use violence or intimidation to collect debts.
Top tips
- Make sure you understand the costs and charges of these options.
- Don't borrow for longer than necessary. You’ll pay less each month, but you could pay more interest overall.