Iceland is experimenting with loans through its new Iceland Food Club, run by the charity Fair for You — but families may be able to get free help with food costs elsewhere
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Iceland offers loans to customers unable to buy food – but shoppers are still urged to only borrow if they are really struggling.
A pilot scheme sees borrowers applying for short-term “micro loans” through the Iceland Food Club, which is run by the charity Lender Fair For You.
Families can order from £25 to £75, which is paid off in weekly £10 installments, and there is a credit limit of up to £100 at any time.
Once approved, the loan is transferred to a Food Club Card, which can be used to pay for online or in-store shopping at Icelandic supermarkets and The Food Warehouse.
Richard Walker, managing director of Iceland, says the £75 to be paid over eight weeks will pay the borrower an interest of £2.89.
Ian Cooper/North Wales Live)
He said that if someone borrowed a minimum of £25, it would attract 40p interest.
The interest rate payable is 45%, which equals 55.6% APR, according to Fair for You.
In comparison, some short-term, guarantor and home loan providers can charge interest as high as 1,557.7% APR.
The Mirror asked Iceland how the interest applies and whether late payments are imposed and we’ll update this article when we know more.
We also check how Iceland decides who qualifies for a loan.
But struggling families may be able to get help to cover the cost of food for free – which means they won’t need to borrow.
Do you think Iceland should provide loans to people? Let us know in the comments below.
For example, Sarah Williams of the Debt Camel blog says some councils have taken cash from the government to help residents in the form of a £500m Family Support Fund.
Since this money comes as a grant, you don’t need to give it back if you qualify for support.
Some councils give food vouchers to families to spend at supermarkets like Tesco, Morrisons, and Asda — but it’s a zip code lottery and depends on where you live.
Ms Williams said: “Fair for You is an ethical lender that offers a much cheaper alternative to expensive ‘pay week’ stores for people in need of white goods and furniture.
“Their new micro-food loans are topped up with very small amounts of interest, even though the interest rate may seem high. If one of these loans gets you out of a tight spot, that’s great.
“But in the long run it’s not a good idea to keep borrowing to buy food. Councils are giving extra support this winter through the Family Support Fund that can help you with grants that don’t need to be repaid.”
You may also be able to get free help through your local food bank if you’re already struggling.
In a blog post, Mr Walker said: “Before we launched the Food Club, 84% of respondents went without it because they could not buy food, and half were referred to food banks – even among those who meet the strict eligibility criteria for food banks, there are many who They are too embarrassed to use it.
“Since joining the food club, 83% of respondents told us they no longer need to access food banks, 80% reported an improvement in their mental health, 85% said they were less concerned about making ends meet, and 75% reported that they feed their children more correctly.
“These are great improvements, but they are based on just a few people over a short period of time. A more detailed and independent Social Impact Report will be released this year, which will tell us more.”
Iceland first launched a Food Club initiative in two communities in Yorkshire and North Wales in 2020.
It has now been rolled out across North West England and South Wales, providing over £1m in loans so far.