Frozen food retailer giant Iceland are offering 'micro-loans' to customers as the rate of inflation hit 6.2 per cent in February according to Official National Statistics.
In a bid to help those pay for food shops, which are continuing to increase, Iceland are offering customers between £25 and £75 through the Iceland Food Club, operated by charity owned lender Fair For You.
As the The Mirror. reports, families can ask for between £25 to £75, which is repaid in £10 weekly instalments, and there is a maximum credit allowance of £100 at any one time.
Once approved, the loan is transferred to a Food Club card, which can be used to pay for shopping online or in-store at Iceland supermarkets and The Food Warehouse.
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As it is a loan, there is an interest rate added. Iceland managing director Richard Walker explains that a £75 load repaid over eight weeks would see the borrower pay interest of £2.89. Meaning if someone borrowed the minimum of £25, this would attract 40p interest, he said.
According to Fair For You, the interest rate payable is 45 per cent, equivalent to 55.6 per cent APR.
However, families can avoid borrowing and still may be able to get help paying for the cost of food, removing the threat of new debt.
For example, Sara Williams of the Debt Camel blog says some councils have been given cash from the government to help residents in the form of a £500million Household Support Fund.
In Scotland, there is the Scottish Welfare Fund and The Home Heating Support Fund which is open until March 31, 2022 that can help with energy costs.
As this money comes as a grant, you don't need to pay it back if you qualify for support. Some councils are giving families food vouchers to spend at supermarkets like Tesco, Morrisons and Asda - but it is a postcode lottery and depends on where you live.
Ms Williams said: "Fair for You is an ethical lender who provides a much cheaper alternative to expensive 'pay weekly' shops for people that need white goods and furniture. Their new micro-loans for food have only very small amounts of interest added, although the interest rate can look high. If one of these loans gets you out of a tight spot, then that is great.
"But long term it isn't good to have to keep borrowing to buy food. Councils are providing extra support this winter through the Household Support Fund which could help you with grants that do not need to be repaid."
You may also be able to get free help through your local food bank if you're really struggling.
Simon Dukes, CEO of Fair for You, said: "Whilst some people are dependent on grants for food, many families are struggling to put food on the table in school holidays and either don’t wish to go to food banks or are ineligible.
"An independent social impact report shows that Food Club provides a lifeline for these families. Food Club can only be used a few times per year and therefore can not be used as an ongoing, long-term way to buy food. Affordability checks are run to ensure micro credit is offered only to people who can demonstrate a means of repaying. Fair for You, as a charity-owned lender, provides support and flexibility to help customers make repayments.”
Iceland first piloted its Food Club initiative in two communities in Yorkshire and North Wales in 2020. It has now rolled out across north west England and South Wales, offering over £1million in loans so far.
Mr Walker said in his blog post: “Before we launched the Food Club, 84 per cent of participants went without because they could not afford to buy food, and half were referred to food banks – though even among those who meet the tight eligibility criteria for food banks, there are many who are simply too embarrassed to use them.
“Since joining the Food Club, however, 83 per cent of participants tell us that they no longer need to access food banks, 80 per cent report an improvement in their mental health, 85 per cent say that they are less worried about meeting their monthly expenses, and 75 per cent report that they are feeding their children more healthily.
“These are outstanding improvements, but based on a small number of people over a short time period. A more detailed, independent social impact report will be produced this year, which will tell us more.”
