INTEREST free loans are being provided in a bid to break a cycle of poverty affecting an increasing number of families in Tenbury and the Teme Valley.

Tenbury Nils (no interest loans) has been granted charitable status and can offer loans of up to £400 to people in need that can be repaid over 12 or 24 months.

The loans are not only interest free but also have no administrative charges, so the borrower just pays back the money they were loaned.

This is in stark contrast to the many high interest loans and credit options currently available, which people on low incomes often feel compelled to rely on.

The money for the scheme comes largely from an anonymous donor, but other pockets of money, including £500 from Malvern Hills District Council, are also being used.

It’s charitable status will open the door to other funding .

“This has the potential of breaking poverty cycles within a household providing alternatives to high cost credit,” said Jane Newton, who works for Tenbury Citizens Advice Bureau and runs the loans scheme as a separate entity with its own board of trustees.

She picked up the idea while working in Australia and believes it is the only one of its type in this country.

“As far as I know we are unique in the UK and the way that we operate is different from a credit union in that we charge no interest,”

said Jane.

The loan is not paid as money but can be used as a credit to buy essential items such as washing machines and other household goods that are provided by a local supplier which puts money back into the economy of Tenbury and the Teme Valley.

“Borrowers are generally people who cannot access commercial credit but can budget for a regular payment of around £25 per month,” added Jane. “Customers can set up a direct debit or choose to pay by cash.

“It is envisaged that most applications, but not all, will be on some form of benefit. In addition to the loan, clients are also given advice on budgeting.”

There have been more than 20 loans but funding is in place to help at least double that number of people living within a 15 mile radius of Tenbury.

If a borrower has repayment problems, Tenbury Nils will try to reach an amicable agreement. As a last resort there is a clause allowing it to try to recover the money from the borrower’s benefits through the Department of Work and Pensions.