Budget 2018 – Interest-free loans for hard-up Brits announced by Chancellor in today's Budget
The Chancellor has unveiled plans that will provide an alternative to high-cost credit that many people are currently being faced with.
This comes as a victory for our Stop the Credit Rip Off campaign, which has been campaigning for more help to those who are unable to repay high cost debt.
The scheme will see the government working with banks and leading debt charities to help design the pilot scheme that will launch early next year.
It's believed it'll be similar to the "Good Shephered" scheme in Australia which has already helped four in five people from having to return to payday lenders to meet their increasing costs.
This works by offering low-income families a fair and safe loan, where affordable repayments are calculated over 12 to 18 months.
How does the Australian Good Shepherd scheme work?
- Fair loans: Those struggling with serious debt are given loans which are safe and affordable
- Availability: The scheme is offered by more than 100 organisations in over 600 locations across Australia, so it's expected that the Chancellor's new scheme will also be widely available. You'll also only be eligible if you earn under a certain amount.
- Essential Costs: This is to help meet the cost of essential household goods such as furniture or washing machines, as well as education and medical expenses
- Non-essential Costs: The loan can't be used to pay for missed rent, debt consolidation, holidays or bills
- Repayment: You pay back the loan at an affordable amount over 12 to 18 months
Plans were announced last year for those facing serious debt to be given a six week "breathing space" period before creditors can enforce further interest and charges.
It's now been announced in today's Budget that this will be extended this to 60 days in order to give people more time to get their finances back on track.
It comes after widespread concerns that payday lenders are targeting struggling households with short-term loans at extortionate rates, which can be high as 6,000 per cent.
The government's plans to help those in debt were welcomed by Martin Lewis from Money Saving Expert.
He said: “It’s good news. We’ve been at the mercy of payday lenders and exorbitant interest rates for far too long.”
Earlier this month the city watchdog warned that millions of people may be due refunds from payday loan firms.
Following this a new free tool to help payday loan customers to claim compensation has been launched.
It allows anyone who has ever taken out a payday loan or is still paying off their debts to raise a complaint directly to their lenders.
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