Provident Finance is a UK based financial corporation which offers credit with a difference, and has legal APR’s ranging from 272% to 545%. Whilst arguments fly over high interest rates on payday loans Provident provides loans to an estimated 1.8 million happy customers, some of whom would not even qualify for payday loans as fall short of the criterion of having a high enough income or a bank account.
Home credit may be better known as doorstep lending. A loan is issued to the customer in their own home and weekly payments are collected by an agent. Unlike loan sharks there are no unsavoury methods used to collect the payments and financial difficulties can be dealt with by loan extensions without additional late payment charges being added.
Provident offers home credit loans from £50 to £500 and the customer may choose to repay the loan over 23 weeks, 31 weeks or 1 year. The interest rates are clearly spelled out to the customers in advance and they will know the exact cost of their weekly repayments, and the total amount which they will repay. Typical costs are:
£100 x 52 weeks = APR of 272.2%: Total repayment £182.00
£100 x 31 weeks = APR of 365%: Total repayment £155.00
£100 x 23 weeks = APR of 545.2%: Total repayment £149.00
The APR’s are high as the loans carry no penalty or default charges, and to cover the cost of the commissions paid to the weekly collectors who work in a self employed capacity. No security is required for the loans that are usually extended to those with no credit history who prefer to deal with cash. A large percentage of customers are women.
The company states that it always follows fair and responsible lending practices and offers a friendly and flexible service. Customers are not pressurised to take out a larger loan than they require or can reasonably repay, but agents can issue further loans as they deem appropriate. Once a customer is approved for a loan in their home the loan is then delivered to the customer by the agent in what is known as a ‘loan to home’ service.
Provident Financial have previously defended themselves against charges of exorbitant interest rates by arguing that the administrative costs of such relatively small loans do not make their charges exorbitant and that the loan agreements are transparent and understandable to their customers.