FAQ

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.

Research and debate FAQ

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.

What makes home credit unique?

  • The cost of borrowing is fixed and all-in. Charges are set out clearly for the customer in the written information they are given before they take out a loan. Details of the charges are set out again in the contract they sign when they take out a loan.
  • There are no penalty fees, late fees or extra payments. Charges and the total amount payable are fixed and cannot change. Thus each pound repaid by the customer brings down the total amount owed by a pound.
  • All would-be borrowers are assessed in person.
  • Loans are granted and repayments collected from customers at home by an agent.
  • Repayments are collected weekly, making the amounts repaid small and manageable. Many customers budget on a weekly basis.
  • Home credit customers say they like the personal service and convenience agents provide.

How much do customers usually borrow?

New customers are usually able to borrow between £50 and £500. Before issuing a loan, an agent will visit the customer at home to carry out appropriate checks and assess their individual circumstances. Generally, new customers borrow smaller, shorter-term loans. Customers who show us that they are able to manage their repayments become eligible to borrow larger amounts over longer periods.

How do you make sure the agents who lend on your behalf lend responsibly?

  • All would-be customers are assessed face to face at home by an agent.
  • Home credit providers offer a home-based service via agents because this provides the best method of understanding and responding to the individual circumstances of customers.
  • Before issuing a loan an agent carries out appropriate checks.
  • First time customers typically receive smaller, shorter term loans.
  • Agents are paid commission which is directly linked to customer repayments. This overtly encourages agents to make the best lending decisions possible.
  • There are no penalty fees, late fees or extra payments. Charges and the total amount payable are fixed. Thus each pound repaid by the customer brings down the total amount owed by one pound. A fixed total cost means the amount the customer owes cannot 'spiral'.

Why are repayments collected from the customer's home?

  • Weekly home collection is key to the home credit business.
  • The same agent who made the decision to lend to a customer calls weekly to collect repayments.
  • A weekly visit matches how customers budget and enables them to repay smaller and more affordable amounts (compared with monthly repayments).
  • Home credit customers say they like the personal service and convenience agents provide.
  • Calling weekly, agents are well placed to spot when a customer's circumstances might have changed.
  • Where a customer has a short-term problem, the agent can easily reschedule payment on the spot at no added cost. Most home credit customers will draw on this penalty-free flexibility at some point during a loan.

Why are repayments collected on a weekly basis?

  • Weekly home collection is key to the home credit business.
  • The same agent who made the decision to lend to a customer calls weekly to collect repayments.
  • A weekly visit matches how customers budget and enables them to repay smaller and more affordable amounts (compared with monthly repayments).
  • Home credit customers say they like the personal service and convenience agents provide.
  • Calling weekly, agents are well placed to spot when a customer's circumstances might have changed.
  • Where a customer has a short-term problem the agent can easily reschedule payment on the spot at no added cost. Most home credit customers will draw on this penalty-free flexibility at some point during a loan.

What happens if someone has trouble repaying?

  • Agents call weekly and are therefore well placed to spot when a customer may be in difficulty.
  • Where a customer has a short-term problem, the agent can easily reschedule payments on the spot at no added cost. Most customers will draw on this penalty-free flexibility at some point during a loan if they find themselves unable to make a weekly payment. Home credit is designed to flex if a customer can't pay. The total amount the customer pays is fixed and cannot increase, even if a payment is made late or missed altogether.
  • If a customer has a more serious or long-term financial problem, and we feel they could benefit from debt advice, we may refer them to a source of free money advice such as the Consumer Credit Counselling Service. We are also committed to co-operation with any debt advice organisation the customer may appoint to act on their behalf. Our approach to dealing with customers in financial difficulty was recognised in a 2010 report by Citizens Advice, Do the Right Thing.

How is home credit regulated?

Home credit companies are regulated by the Office of Fair Trading which scrutinises the provision of consumer credit through a licensing and monitoring regime. The OFT will refer to the Consumer Credit Act (CCA), any Guidance it has issued to clarify or enhance how the CCA should be applied in practice and any other relevant consumer protection legislation (for example the Consumer Protection Regulations) when assessing whether a home credit company has acted lawfully and appropriately.

Home credit customers are covered by the free Financial Ombudsman Service (FOS). This means that any customer who is dissatisfied with how a home credit provider has dealt with any complaint can apply to the Ombudsman at no cost for a decision from FOS on whether they have been treated fairly and appropriately. FOS publishes data bi-annually on the complaints it receives and whether the adjudication made in each case was in favour of the customer or the provider.

Is home credit transparent?

  • Home credit is a fixed, all-in method of borrowing. This is a set out clearly for the customer in the contract and pre-contract information they receive when they take out a loan.
  • There are no penalty fees, late fees or extra payments. Charges and the total amount payable are fixed at the outset and cannot change. Thus each pound repaid by the customer brings down the total amount owed by a pound.
  • All home credit customers have a payment book. The agent updates this every time a payment is made. The payment book is an up to date record of exactly what the customer has paid and what is still owing on a loan.

Who uses Provident?

Typically, Provident customers are from ordinary working families. The majority of our customers are women. Customers 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.

What do customers use their loans for?

Customers use their loans to spread the cost of a range of expenses, such as Christmas, birthdays, holidays, the beginning of school terms, or household purchases.

Why do customers choose home credit?

  • Home credit is a convenient way for customers to borrow relatively small amounts. Repayments are collected on a regular, manageable basis. This means customers know at all times exactly what they owe.
  • Loans are manageable and give people a convenient, easy and regular way to repay what they owe.
  • Customers appreciate the friendly, personal service provided by the agent.
  • Customers also like the fact that their agent knows them personally. In a world of call centres and internet services, they appreciate the weekly, face-to-face contact with their agent.
  • Some families have been customers through several generations.
  • Many UK households have no savings at all. Even when they do, for special occasions or when unexpected expenses crop up, people often need more than they might have been able to save. If this happens a home credit loan can help to smooth the peaks and troughs of household finances.

What is APR? / What is the difference between APR and interest rates? / Why are your APRs so high?

APR, or annual percentage rate, was designed to help people compare the potential costs of different borrowing options. However, in practice, using APR isn't so straightforward.

The APR formula is complex. It calculates not just money (the amount lent, repayment amounts and total overall costs to the borrower) but also time (the length of the loan and frequency of repayments). Even if the money element of the calculation remains the same, changes to the length of the loan term and/or frequency of repayments will change the APR dramatically.

Another key issue to consider is that the interest rate may be only one component of APR. Other components that may be included in the calculation of APR (but often are not) include optional insurance charges and the penalty charges incurred if the customer defaults on the term of the loan. Depending on the kind of credit being offered, these other components can be excluded from the APR calculation. If some of the components can be left out, the APR figure will be lower but it won't necessarily tell a would-be borrower how much he or she might have to pay back in total.

Although APR was introduced to help people compare the cost of loans, it obviously doesn't work where one lender's APR includes all the costs of lending (for example for home credit the most significant cost is weekly collection) and other lenders' products do not. For some lenders the cost to a borrower can be expressed as the interest rate a borrower will pay (literally only the cost of the money). Any administration charges or penalty charges payable if a customer defaults can be excluded: a good example of this is bank overdrafts. This demonstrates that 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 the other charges out – is like comparing apples with oranges. APR can therefore also paint a confusing, or even misleading, picture.

When calculating the cost of a home credit loan a would-be customer can easily see what it will cost in total, in cash terms, to borrow any given amount. The customer can do this because the home credit charging model is fixed and all-in; therefore fundamentally different to that of other lenders. Fixed cost borrowing is important to those on low incomes as they are more likely to miss a payment in the course of a loan. Aware that this may happen, many of them prefer products with all-in, upfront charges (even where these have a high APR) to lower headline charges in combination with penalty or late payment fees. Provident home credit has a single, fixed charge that customers see upfront. The APR is all-inclusive. It includes the interest charge for the money, the charge for the weekly collections from the customer's home and the reassurance that there will be no extra or hidden charges, even if the customer misses or makes a late payment.