No Interest Loans now available for low-income families
28 April 2015
BNZ, Good Shepherd NZ, Ministry of Social Development and The Salvation Army have launched the second stage of their successful Community Finance initiative – the No Interest Loan Scheme (NILS).
The Community Finance initiative was launched in August 2014, and aims to help people that banks don’t normally lend to, and who are often forced to borrow at high-interest rates from loan sharks and pay-day lenders.
The new no interest loans of up to $1000 for a maximum of 12 months, are now available to people on low incomes through The Salvation Army’s centres in Manukau and Waitakere.
The life-changing loans can be used to purchase essential services or household items that directly improve the lives of borrowers.
Joanne Forgie, a Community Finance worker at The Salvation Army’s Manukau Community Centre is excited about the impact that the loans are already having.
“One of our new no interest loans offers a way for families to pay for essential family items such as a computer for the kids, or unexpected events such as the car breaking down.
“Being able to have the car fixed means the person can still get to work, get the kids to school, or get to a doctor’s appointment.
“The repayments on a $1000 loan can be as little as $20 a week, and with no interest or other fees charged, the loans are paid off even faster,” she says.
The initiative began with one loan product; low-interest rate ‘StepUP’ loans of up to $5000 for larger assets. Already, 44 loans have been approved, and Community Finance workers are working to help other applicants get their financial affairs into better shape so they can become eligible.
BNZ’s head of community finance, Frances Ronowicz is delighted with the progress of the pilot so far, and excited about what the next phase will bring.
On average, a StepUP loan saves each customer more than $2000 in interest over the life of the loan, compared to if they had borrowed the same amount through alternative lenders.1
“If the average family grocery bill is $200 per week2, that’s two and a half months’ worth of groceries.
“While it’s still early days for the pilot, it’s been wonderful to be able to offer more help to families, and provide another way for people to borrow on fair terms and make their money go further.
“One of the Community Finance clients used her low-interest loan to get a car, making it easier to get to work, which gave her some financial security that she didn’t have before,” she says.
Good Shepherd NZ’s Matt Halsey is excited about Good Shepherd’s pivotal role in the Community Finance initiative, managing the roll-out of the loan schemes in New Zealand.
“All of the organisations involved have learned a lot in the first six months, and we have gained valuable new insights into New Zealand client needs.
“With the launch of NILS, in addition to the low-interest StepUP loans, we’re expecting that the numbers of families that we’re able to help will grow substantially, and we’ll learn more from the pilot.
“Community Finance has huge potential to make a significant difference to more of the people who need it most,” he says.
1Estimated interest is based on a rate of 30% over an average loan term of 32.4 months. Estimated fees are based on a $250 establishment fee and a $10 per month administration fee.
2Household Economic Survey: Year ended June 2013. Statistics New Zealand. www.stats.govt.nz