New Government Scheme To Target Those At Risk From Loan sharks

A new Government scheme called My Home Finance is to offer affordable loans to consumers in a bid to prevent vulnerable and at-risk groups borrowing from loan sharks. The loans will have a typical APR of just 29.9% initially, which compares favourably with many door-to-door products, which often have APRs well over 200%. The announcement will be welcome news for those already struggling with high interest doorstop loans to restructure existing commitments and bring their debt repayments back under control.

The Scheme will initially operate with 10 branches in the West Midlands. Work and pensions secretary Iain Duncan Smith, who launched the scheme said “I've dealt with doorstep lenders in the past, and payday lenders now, and they are robbers. My Home Finance are very fair to deal with, and the loan will be repaid after 52 weeks so you know exactly where you stand.”

There was however a note of caution sounded by David Rodger, Managing Director of national debt charity Debt Advice Foundation who said “It is important to recognise that whilst taking on additional borrowing is rarely the solution to financial impairment, the reality is that people still do it. Although the rate of interest itself is an important consideration, the main factors that need to be taken into consideration are whether the family can afford the repayments in monetary terms and whether there is a more appropriate solution for them. If the advisor is satisfied that the person can afford the repayments and there isn’t a deeper, underlying debt problem being masked by the need for additional borrowing, then this scheme could be beneficial for lots of families. My main concern would be whether there are enough checks and balances in place to make sure borrowers do meet all this criteria – let’s not forget that we’ve seen inadequate credit suitability appraisals consistently over the course of the last ten years in the commercial sector.”

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