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Ministers consider interest-free loans for low-income families

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Low-income families could be offered access to interest-free loans as part of government plans to prevent vulnerable people from falling into the hands of expensive loan sharks and payday lenders.

In Monday’s budget, Chancellor Philip Hammond will announce that ministers will look for ways to partner with charities and the banking industry to provide interest-free loans to those in need.

Officials say a similar program in Australia has proven to be very successful, helping four in five of those who took out the loans to stop borrowing from payday lenders.

Ministers now want to see if such a system could be used to provide a more affordable alternative to the UK’s three million high-cost credit users.

Loans
Philip Hammond is considering interest-free loans for low-income families (Craig Brough / PA)

In other measures, Mr Hammond will announce an extension of the “breathing space” for people with debt problems, offering legal protections against lawsuits against creditors, from six weeks to 60 days, giving them more. time to get their finances back on track.

It follows a consultation earlier this year in which evidence was gathered from charities, activists and the financial services industry.

The Chancellor is also offering a £ 2million challenge fund for tech entrepreneurs who can find solutions to counter the lure of payday lenders who offer access to cash in less than 10 minutes.

But the plans were rejected by Shadow Chancellor John McDonnell, who said ministers are now trying to fix problems they themselves helped create.

“This is a farce from a government that has overseen the expansion of high-cost problem credit on an industrial scale, and whose flagship social security policy, universal credit, is pushing low-income households. got back into debt, “he said.