There are a number of councils that provide a loan to families that are local to their borough or district. The schemes listed below can go by many different names and any available funds are used for paying different types of bills. Some local authorities will offer an interest free loan for paying a rent deposit or other housing costs. Other councils offer this type of financial assistance as part of welfare, and they may allow the money to be used for paying energy bills or for other essential living needs. The criteria vary by area.
These schemes are separate from the central government funded or Department for Work and Pensions programmes. They do not operate the same as budgeting or crisis loans, which many people may be familiar with and are separate from other government safety net benefits.
Instead, the money to fund these council programmes will normally come from the local authorities allocating resources to them. This will mean that the money is offered to their residents at their own discretion. The agencies have an large amount of flexibility administering these loans and can therefore decide what type of bills the funds can be used to pay.
On a negative note, the councils are not obligated by law to provide assistance to families and the amount of funding available is limited. Therefore families on a low income can not depend on these funds for solving their crisis.
Availability of council loans
With the cutbacks in central government benefits for families living in poverty and the increasing restrictions on payday lenders, many people need another source of low cost loans. The applicants will often not qualify for mainstream lenders such as banks as they often have poor credit or other barriers.
There are households that need some extra money for paying bills when they are threatened with a short term emergency. Therefore the demand for financial assistance in a crisis is always very high and the money will sometimes run out during the course of the year.
Depending on what type of help a household needs, this may determine whether they can get assistance or not. There are some area of the country in which the interest free loans can only be used for housing costs such as a rent deposit. Other councils merge their financial aid together with local welfare schemes, and these tend to allow more flexibility. In these cases, the loans can often help with paying for energy bill arrears, emergency transportation, clothing, and other expenses.
The authorities will normally partner with credit unions to run the programmes. They will help with the application process, issue the cash to approved borrowers, and also provide other forms of support, such as budgeting and free advice on paying down debt arrears. The specialists at the credit unions help ensure these council run loan schemes are successful and that all of the money is repaid.
Another benefits to using a credit union is that they are operated as not-for-profit organisaions. This allows them to provide cash for paying bills to borrowers at a much lower interest rate than say payday lenders or loan sharks. They also provide the client with long term support to help them gain stability.
Conditions placed on borrowers
As is noted, each council will have their own criteria in place. While the terms and conditions placed on borrowers will often be vary different, some of the common criteria are below.
- Any loan provided comes with a payment plan that needs to be followed.
- Borrowers will often need to participate in money management workshops to help them save money, deal with debt arrears, and maximize their income.
- Council financing can only be used for paying certain types of bills or debt arrears that the authorities approved. Many agencies issue these funds as part of their rental deposit schemes or as a form of homeless prevention.
- Funds can often be issued to applicants with poor credit ratings, but those may have different repayment plans.
Many other eligibility can be put into place. Those are some of the common examples and many of the schemes are different.
Councils that offer residents loans
Some of the local authorities that offer these schemes to their residents are below. Also, an increasing number of local government councils are providing loans though in an effort to give an alternative to payday companies. Even if an areas is not listed, people can still make enquires on this service. At the least, they may be signposted to other low cost lender.
Swansea deposit scheme.
Swansea council loans for rent arrears.