This page contains all FAQ information found on the Provident Financial web site. Please click on the tabs below to read our General, Investor, Research and debate and Customer FAQs.
What is home credit?
Provident home credit offers small, unsecured loans with affordable, flexible repayments. Loans are granted and repayments are collected each week in the customer's home by an agent. Most agents are women, often living in the communities they serve. Many are also former customers. Home credit provides customers with a simple, convenient, and transparent service. There are no hidden charges or late payment fees and the amount to be repaid will never increase.
Who takes home credit loans?
Our typical customers are from ordinary working families and want to borrow small amounts of money that they can pay back conveniently in small, regular amounts.
The majority of our customers are women. They are not always the main breadwinners, but they often control the household budget. The breadwinners in these households are more likely to be hourly-paid or have part-time or casual work than be in full-time salaried employment. Less than half of our customers are in receipt of non-universal benefits.
Does home credit offer good value for money?
Home credit offers very good value for money when the small amount of money being lent, the home service and the fact that the total amount to be repaid cannot rise (even if the customer is late in repaying the loan) are taken into account.
How does the cost of home credit compare with the cost of other ways of borrowing small amounts of money?
Our charges are comparable with those of other types of small-sum credit such as credit cards and bank overdrafts. Although our APRs may appear higher, these types of lenders do not include administration and penalty charges in their APRs and so direct comparisons are misleading. Bank current accounts and credit cards impose charges when customers default, which can add considerably to the total cost of credit.
Home credit, on the other hand, includes all the charges up-front in its APR. This includes not just the interest rate but also the cost of the weekly visits to the customer's home and the cost of not imposing any default interest or charges. Comparing two different products – one of which includes all of the charges in its APR, the other which only includes the interest rate in its APR and leaves out other charges – is therefore like comparing apples with oranges.
When all of these other charges are taken into account, the cost of home credit compares favourably to other sources of small sum credit.
Why are the APRs so high?
Home credit APRs include costs that other lenders' products do not. Most lenders only include the interest charge in the APR, leaving out additional fees such as optional insurances, set-up charges, and penalties for late or missed repayments. Home credit, on the other hand, includes all the charges upfront in its APR. That includes the interest charge for the money, the charge for the weekly collections and the absolute guarantee that customers will not face extra or hidden charges, even if they are late in repaying their loan.
Furthermore, APR is not necessarily a good way to compare the cost of small-sum credit. In a study on affordable credit, the Joseph Rowntree Foundation noted, “APRs are a very poor way of comparing the cost of different loan products at this end of the market, largely because lenders differ markedly in the way that they structure their charges.”
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Would a legally imposed maximum interest rate help home credit customers?
No, a legally imposed maximum interest rate would not help home credit customers. By restricting what lenders can charge, interest rate ceilings force lenders to be more selective in terms of whom they are able to accept for loans. Suppliers stop serving those customers – invariably the less well-off – who are higher-risk and only want small loans. In effect, the ceilings increase financial exclusion. Rather than helping consumers by making credit cheaper, interest rate ceilings would make credit less accessible and reduce consumer choice. This could lead consumers on low incomes who require short-term cash loans to borrow from illegal lenders.
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How do you make sure you lend responsibly?
Because agents visit their customers each week, they know their circumstances and can judge their ability to take a loan and make repayments. Agents receive commission based on how much they collect, not how much they lend, so it is in their interest only to lend amounts that customers can afford to repay comfortably. And, because the money lent to customers is completely unsecured, there is no point in us lending more to customers than they can afford.
Is Provident Financial an ethical company?
Yes we are. We make sure we lend responsibly to our customers and always try to act as a good corporate citizen. We are included in the FTSE4Good index, the Business in the Community (BitC) index on CR and the Dow Jones World Sustainability Index. Visit our corporate responsibility section for more information.