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The Chancellor of the Exchequer, Phillip Hammond, has recently announced the budget for 2018 and there have been a few key elements that have arisen from the decision. One of which is surrounding loans. As a result of his new no-interest loans scheme, Hammond has set out plans to undercut payday lenders.

The scheme will respect the function that short term loans play, however it will aim to help find a solution for those people who are caught in debt that they are unable to pay off. 

It can be said that the UK has taken inspiration from a similar Australian scheme to bring about this idea. The Treasury has said that the scheme in Australia helped 80% of people who decided to take out the no-interest loan in order to stop the constant cycle of payday loans. After the success in Australia, The UK has decided it would be a good idea to trial this scheme. 

In the UK, roughly 3 million people will be offered this initiative brought in by Hammond with the aim of trying to help pay off debt which they may have from high-cost credit, such as a payday loan.  Phillip Hammond will be linking up with banks, debt charities and lenders in order to ensure that this scheme is fulfilled properly and so that those who are involved are fully aware of what they will have to do to be impacted.

Furthermore, in order to fund this, £2million of Whitehall cash will be going towards structuring the no repayment plans in a bid to get rid of the illegal loan sharks. It is hoped that this scheme will enable them to be driven off the scene entirely. Companies that specialise in technology will be given money in the form of grants in order to help them acquire new, cheaper alternatives. 

There have been many reactions to this scheme, mostly positive, but as always, some negative. Stella Creasy, who is a Labour MP, has said that she is very pleased with this however, she suggests that the government take this one step even further with the introduction of an interest rate cap on every type of borrowing. She claims that if this were to happen, it would prevent people from having financial problems in the first place. 

Another person who has had an opinion on this is Martin Lewis, the founder of MoneySavingExpert. He has said that he is delighted with the introduction of the scheme as he is known to often share his concerns over the immorality of payday loans.

Another voice of support for this scheme comes from the Bank of England. They have always been concerned about the rising levels of borrowing on loans, car finance and credit cards. As a result of this, they are clearly in favour of this scheme as it will provide a better alternative to borrowing when a person cannot afford to pay it back. 

Chancellor to champion zero interest loans to help rising debt problem
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