Debt fear over 'affordable loans'

The government has launched a new scheme which aims to make credit more affordable, but could end up leading people down the path of debt problems.

The pilot programme in the West Midlands is run by the National Housing Federation (NHF) with the government's backing, and will initially offer loans at 29.9 per cent APR, with rates rising to 49.9 per cent in April.

Whilst the rate is lower than what many payday loan firms and loan sharks may charge, Which?'s debt expert Martyn Saville still believes that it "seems rather steep".

People who have financial problems and want to avoid failing into a debt spiral due to loan repayments may be better off looking into a structured Debt Management Plan (DMP), which could prove to be a more suitable long-term option.

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