Iceland is offering 'microloans' to customers who are unable to afford food with between £25 and £75 available for those who need to buy essentials. The trial scheme sees borrowers apply for short-term loans through the Iceland Food Club, operated by charity-owned lender Fair for You.
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.
Iceland managing director Richard Walker says a £75 load repaid over eight weeks would see the borrower pay interest of £2.89. If someone borrowed the minimum of £25, this would attract 40p interest, he said. The interest rate payable is 45%, equivalent to 55.6% APR, according to Fair for You.
But families who are struggling may be able to get help toward the cost of food for free - which means they wouldn't need to borrow, reports The Mirror. 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.
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% 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% of participants tell us that they no longer need to access food banks, 80% report an improvement in their mental health, 85% say that they are less worried about meeting their monthly expenses, and 75% 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.”
