Budget 2018: Zero-interest Loans

On Monday the 29th of October, the Chancellor of the Exchequer Phillip Hammond released the budget. He explained his intentions for the budget in the House of Commons at 3:30pm, which was also live streamed on the BBC and other channels.

One thing that stuck out for those in the lending industry or people who regularly seek the services of payday loans for bad credit, was the introduction of a scheme which features zero-interest loans. This scheme is to be introduced to help people overcome debt and is set to help out about 3million people across the UK who have found themselves in debt due to high-cost credit loans, including payday loans.


As well as the introduction of the scheme, to make sure that it is a success, the Chancellor will be pairing up with banks, lenders and debt charities. This way everyone will be on board and it can run a lot smoother. To aid this, they will be getting £2million of Whitehall cash which will go towards designing the no repayment plans to defeat the illegal loan sharks, hopefully driving them off the scene completely.

The scheme was, in part, inspired by the success of an Australian governmental scheme. The Treasury has stated that this scheme which was introduced down-under helped four out of five people who had taken out their version of the no-interest loan in order to stop the spiral of debt they were facing. Due to these results, the British government saw no harm in trying it out over here to combat the problem which faces those in low income households.

How did people feel about this zero-interest loan scheme?

Upon the news of this scheme being present in the budget, campaigners have expressed their delight for such a change in the world of lending. This includes MPs, debt charities and fair-lending companies who dislike the illegal sharks present in the industry.

Nevertheless, some campaigners feel that this change, whilst welcomed, does not go far enough. Many believe more could be done to stop the exploitation of low income households in the lending industry.

Labour MP Stella Creasy often campaigns against the effects that unfair lending practices have on people from low income backgrounds and households. She urged the Chancellor and ministers to introduce an interest-cap on every form of borrowing, as to stop the problem before it occurs. With something like this in place, she says, people would not find themselves in such financial troubles to start with and therefore they would not have to even seek out one of these new zero-interest loans to help.

MoneySavingExpert founder, Martin Lewis, was vocal that he was happy with this step being taken by the government. He is known for speaking out against the horrors that unfair lending practices of payday loan companies can lead too.

The Financial Conduct Authority

This scheme is also seen as something which is to complement the Financial Conduct Authority (FCA), who took over the lending industry in 2014 and gave it a real makeover by introducing stricter rules which basically wiped unfair lenders off of the scene in their masses. The rules which they introduced even forced the payday lending poster child, Wonga, to go into administration.


The reason it is said to complement the work of the FCA is because they have been working to make the lending industry more ethical in stopping people falling into debt as a result of them. This scheme introduced by Phillip Hammond’s main goal is to help people who have unfortunately fallen victim to this debt caused by high-cost credit, to get out of it by borrowing a loan which requires no interest on top.

Daniel is a loans expert based in London and has been working in the payday loans industry since 2010.