Interest free loans UK is not a dream query anymore as the No Interest Loan Scheme (NILS) is set to reach up to 20,000 Britons from Sept 2022.
The No Interest Loan Scheme (NILS) is a government-supported scheme that seeks to provide loans to those individuals who are financially weak and vulnerable. Though the Treasury backs it, NILS is run by Credit Unions and other lending organisations.
NILS underwent a successful trial in Manchester in the United Kingdom, where the scheme received a positive response. As a result, this scheme will be launched from September 2022 on a further trial basis in more parts of the UK.
Interest free loans as emergency help
NILS is like an emergency loan for those Britons who lenders have turned down as they could not afford the interest payments for their desired loan. The main feature of NILS is that customers can get one interest free loan as part of this scheme. The loan can be had for a duration of six months to 18 months. Borrowers are eligible to get between £100 and £2,000. However, early trials of NILS have shown that the average amount borrowed is £500.
NILS is currently in the pilot stage and is being funded by the Treasury (£3.8m), JP Morgan Chase (£1.2m) and up to £1m of lending capital by the devolved administrations of Wales, Scotland and Northern Ireland. This amount has been matched in England by Fair4All Finance, a not-for-profit company that partly runs the scheme. Fair4All Finance was founded by the Treasury and the Department for Digital, Culture, Media and Sport three years ago. The objective was to “support the financial wellbeing of people in vulnerable circumstances”.
After its initial trials in Manchester, the expansion of NILS in September 2022 will be for two years, and results will be tabulated. Further expansion will depend on the results of the past two years. These interest free loans are being offered in the hope that the wider society benefits from these loans. NILS seeks to take care of those needs that a grant or any other kind of support cannot handle.
How NILS helps the borrower
The Manchester trials of NILS have shown that these interest free loans have been quite helpful. Borrowers have used the loans in situations that include paying for driving lessons, paying upfront nursery fees, paying for housing deposits and buying essential furniture. There is optimism that eventually, a full-scale programme that offers such interest free loans will be rolled out.
NILS is a new initiative and a product for vulnerable people who, at the moment, have not been able to get loans that they can afford to pay back. The September 2022 rollout of NILS will be a proof-of-concept based on successful Manchester trials. Taking this pilot concept to a bigger pilot version will be the challenge that may need to be overcome and analysed.
The most attractive part of NILS is that the borrower pays back only what he borrows. This is not like other loans where interest rates are charged on the Principal amount and you end up paying back more.
All successful applicants of NILS are allowed to take only one loan. They have between six to 18 months to pay back the loan amount. Chancellor Rishi Sunak had announced the NILS pilot as an alternative to high-cost credit in the March 2021 budget. Although the Treasury backs NILS, it is run by Credit Unions and lenders who will shortlist and recommend borrowers for the scheme.
With Fair4All Finance founded by the government and playing an essential role in NILS, it is understandable that the government is keen to get vulnerable Britons to better and fair financial products and services. This would help many UK residents meet their day-to-day financial needs and take care of any financial disappointments.
A Fair4All Finance survey has found that over three million people access high-cost credit in the UK. As far as savings go, over 11.5 million people have less than £100 in savings. The survey has also observed that the interest free loans of NILS have helped people in serious relationship breakdowns and other depressing life situations. This resulted from the loans giving the people a chance to get them back on their feet.
Who is eligible for NILS?
The NILS scheme is only available for those Britons who have been earlier turned down for regular borrowing. NILS is designed to help people buy essential items and access education and employment. The NILS emergency loan does not provide help to purchase mobile phones, carpets, televisions, flooring, gifts or presents of any kind.
A separate charity covering Herefordshire, Worcestershire and Shropshire also offers a No Interest Loan Scheme. Though the name is the same, the two schemes are not related.
Another benefit of NILS is that it introduces people to the Credit Unions and other lenders providing the loans. Credit unions are financial cooperatives owned by their members. They can also offer more advice on budgeting and debt management. They also provide their services to banks, including securing deposits, ways to save money and offering loans.
The important thing is that a wider rollout of NILS and extra funding is possible if this scheme is successful. Then it could end up helping 500,000 borrowers after an initial two-year period.
The NILS scheme can be considered as an emergency loan that you could use to take care of any personal life situation. If any earlier lender turned you down as you had expressed an inability to pay the interest charges, then NILS may be a small blessing out of the blue.
If you qualify for the scheme, you could be among the lucky few who end up with interest free loans.
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