A new government backed scheme has been launched to offer small loans to financially excluded consumers who cannot get finance through traditional means. It is hoped that the new scheme, which has been launched by the National Housing Federation, will reduce the number of people that are turning to unscrupulous and unregulated loan sharks in order to get finance.

The scheme, which is being piloted in the West Midlands for now, is called My Home Finance, and has been launched in conjunction with the Department for Work and Pensions. Under the new scheme eligible consumers will be able to borrow sums of up to around £500, and will then make weekly repayments to clear the debt.

Before being approved for the loan consumers will have to take part in a forty five minute interview, and this will enable officials to determine whether the person will be able to repay the loan. However, whilst the scheme could help the financially excluded to avoid loan sharks the rate of interest being charged on the loans is higher than the maximum charged by credit unions.

The interest on these loans will start at 29.9 percent APR. However, after the initial period it will rise to 49.9 percent APR. That said, the service could still prove invaluable for many. My Home Finance will also offer consumers financial and debt advice, which is another service that will prove invaluable to many people.

David Orr, chief executive of the National Housing Federation, said: “My Home Finance will provide an affordable, convenient and trusted option for people on lower incomes looking to build up their savings and borrow modest sums.” He added: “By offering fair loans at fair prices, we hope to offer an alternative to both loan sharks, who cynically prey on hard up families, and doorstep lenders, who are all too willing to lend cash to the desperate at hugely inflated rates of interest.”

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