Glasgow City Council has announced its backing for a low-cost loan that significantly removes the risk of financially-vulnerable citizens entering into a cycle of debt.
The Wee Glasgow Loan is a fairer and crucially cheaper alternative to short term, high-cost, products from payday loan companies and rent-to-own shops that can cause a misery for hard-pressed residents.
The new loan product, operated by Pollok and BCD Credit Unions and supported by Glasgow City Council has an extremely low interest rate (2% per month on a decreasing balance.)
With flexible repayments based on what people can afford, the Wee Glasgow Loan has none of the toxic features of payday lenders and rent-to-own companies such as hidden fees, late repayment charges, penalties, threat of repossession and long-term binding repayment contracts. All the things that often leave people who use payday loans and rent-to-own companies regularly stuck in a financial rut.
Although open to all the city's residents the loan is targeted at the estimated 100,000* citizens, including those on benefits, who have no choice but to repeatedly rely on non-mainstream, high cost credit and use rent-to-own companies to buy, white goods and high priced items that are paid up over an extensive set period of time.
Councillor Frank McAveety, Leader of Glasgow City Council, who helped launch the loan today, said: "We know that a high percentage of our citizens are unable to access mainstream credit due to poor credit history, low income and not knowing what the alternatives are. Consequently they are charged well over the odds for the cost of credit.
"These people are being taken advantage of because they feel that they have nowhere else to turn and need money or need to buy say a washing machine quickly.
"Now they will be able to borrow and payback based on their own particular financial circumstances and more importantly find out about more sound ways of saving and low-cost borrowing, to get in a financially steady situation."
Jim Garrity, Operations Director, Pollok Credit Union, said; "For too long now some payday lenders and rent to own retailers have used their position of strength to pray on the most disadvantaged and those in greatest need, often trapping families in an abusive and expensive cycle of debt.
"Pollok Credit Union is committed to providing innovative savings and loan services that are ethical to the communities we serve. With a Wee Glasgow Loan customers will make considerable savings on interest payments compared to using payday lenders.
"We are proud to be part of this project to provide a fair and equal access to affordable credit and financial products and indeed the wider city plan to tackle poverty."
Borrowers, often with poor credit rating and limited or no options for obtaining mainstream credit, are often unaware of the high costs and terms of these agreements that can lead to being caught in a cycle of debt to cover repayments, fees and late payment charges.
This strain can also have associated problems including impact on health, family life and work.
In direct competition to big name lenders, the application process, online at www.weeglasgowloan.scot is easy, with a quick decision and pay out. But with fairer terms it is hoped to get applicants access to more traditional credit unions products such as savings and affordable credit - to stop them paying a poverty premium.
Where applicants do not meet the affordability criteria for a loan, referrals are made to a financial support service with free sessions that review your financial circumstances and offer advice to achieve financial stability.
The launch of the Wee Glasgow Loan comes hot on the heels of the launch of the People Make Glasgow Fairer strategy that has recently seen the school clothing grant increased to £52 per year, with 5000 new claimants for the grant targeted and the council's affordable warmth dividend launched to help citizens aged 80 and over heat their homes this winter.