MSE News: Government-backed lender launched to help low earners

Apples2

Can anyone see what happens.....when the inevitable happens?

The borrower takes the loan and shouts "Redundancy, I needed a new tooth crown, I forgot all about it, I got ill, I moved house" etc etc etc?
What happens when it goes to default, as a high portion most definitely will, charges etc?

I can't find anything

http://www.myhomefinance.org.uk/loans.html

[Deleted User]

better to join a credit union,average 12.9%apr,ok you have to save with most of them for a period but thats no bad thing

vix2000

JimmyTheWig wrote: »

And how, exactly, is a low income family going to repay £500 in a month?

My sentiments precisely. You beat me to it!!!

Morglin

Anything that keep people away from loan sharks is a good thing - but Credit Unions are a much better option, and people living in poverty should explore the possibility of a Social Fund load before they go anywhere near any sort of 'commercial lending' firm.

Lin

Peelerfart

Anyone remember the days when if you couldn't afford something you did without until you had saved the money ?

JimmyTheWig

...If you borrow £500 over three years at 10% it costs £80 in interest. At 29.9% over a month, it will cost £12...

Premier wrote: »

How misleading. I would have hoped for something much better from MSE (even if they are publishing a PA item), by comparing like with like at least.

While I stand by my earlier criticism that paying off £500 in a month is not going to be possible, I have to disagree that it is misleading.
The point being made is that the time taken to repay is just as relevant as the interest rate.
Obviously the best solution is to repay at 10% over a month and the worst is to repay at 29.9% over three years. But just by looking at the figures some people wouldn't know which was a better plan of the two "middle" options given above.

Stuart_W

Surely this will be a failure, won't it?

Once the government funding ends, and the lending reverts to the "commerical" rate of 49.9% surely this service will be doomed.

If the market could truly sustain such a lending rate, wouldn't it already be offered?

I'd be inclined to agree that this service will help further to normalise debt for those who can't afford it, in plush government-sponsored offices that draw even bigger attention and a wider audience than the doorstep villains and it could end up pushing more and more custom towards loan sharks.

Provident loans to pay off My Home Finance loans on the horizon?

For goodness sake. This support should have been ploughed into credit unions with money education conditions attached, which I'm sure they would have been delighted to accept, and the government should have the balls to legislate against high loan interest.

I_luv_cats

The interest rate is going up to near 50% next year!!!

Thought Process??

(A) Do you really need the money / Item ??
(B) Raise ££ by a declutter etc. (Carboot/Tabletop/Ebay) ??
(C) Charitable Trust ??
(D) Can you get a Social Fund Loan or family help ??
(E) Credit Union if you have saved with them ??
(F) This new Loan Scheme ??
(G) Door Step Lender as last resort??

Paul_Herring

Stuart_W wrote: »

Surely this will be a failure, won't it?

Of course it will.

Once the government funding ends

It's effectively run by the government. Funding won't end.

From the link:

Mark_Wadsworth wrote:

Please note that all of the parties involved are branches of government or are controlled by the government and financed by the taxpayer - the National Housing Federation is just the umbrella lobbying body for Housing Associations, who are in turn creatures of legislation and financed by the taxpayer

Pembroke

Even some credit unions aren't immune to bad debt. My local one has lost it's licence to offer loans and is currently redirecting savers to the Financial Services Compensation Scheme.

http://www.bbc.co.uk/news/uk-wales-11170567