There are more than 400 lenders out there who are willing to give you money with zero interest.
Could they spell the end of payday lenders who charge outrageous interest rates?
Need a new car, new fridge, or a new lounge but can’t afford it? Now you can, with no tricks and no traps.More stories from Today Tonight
Mikala Hehir is head of Community Finance and Development at the NAB, and says the No Interest Loan Scheme provides funding to those who need it most.
“NAB provides money free of charge to a range of charities across the country, and then the charities use that money to give out, by way of loan, to their clients. As the clients pay it back, that puts more money back into the charity’s account, and then another person can take out a loan,” Hehir said.
It’s a scheme first developed by the Good Shepherd Youth and Family Service, and now adopted by 400 different organisations around the country, including the Islamic Council of Victoria.
“It’s a very honourable thing to try and assist people who are in need,” The Islamic Council's Sharene Hassan said.
Hassan points out that microloans from The Islamic Council are also available to non-Muslims, for the purchase of household goods or educational necessities.
“People can borrow up to $1000, and this is a loan that is interest free. They are expected to try and make repayments every fortnight, and they’re encouraged to finish repaying the loan in eighteen months,” Hassan explained. “Absolutely no interest is charged at all.”
So what's the criteria? Borrowers must be on a low income, have a health care card, or be receiving Centrelink Benefits. All applicants are interviewed and assisted with a budget, and loans must be repaid within eighteen months. They are not granted for cash advances, living expenses or department repayment and consolidation.
“It’s not a luxury, it’s a necessity,” disabled pensioner Marie-Noelle Ash said.
For Ash a crippling back problem means she can't use public transport. After being knocked back by the banks for car loans, she turned to the Brotherhood of St Lawrence.
“Within a week they gave me the first car loan of $3,000,” she said.
Ash has now upgraded with a second loan to a Nissan Maxima, and does pay interest, but with payments fixed at $50 a fortnight for five years.
“When I compare the loans to the banks, or the other financial institutions, the Brotherhood of St Lawrence is so much cheaper.”
Sally Finlay from The Brotherhood of St Lawrence says its ANZ Progress Loan carries interest, but you can borrow more.
“It allows people to borrow up to $3000 for household goods, or $5000 for a car,” she said.
“It’s a myth that poor people can't manage their finances. If you're given the right tools, and given access to products that the rest of us can access, they can pay back loans.”
“The no-interest low-interest loans are a great idea,” Consumer Action Law Centre CEO Carolyn Bond.
Bond says the loans are not to be confused with the notorious Payday Loans.
“Payday Loans tend to be for a short term. They’re often given because people just haven't got enough money to pay bills for other expenses, and a big payment usually comes out on payday. People often get into further trouble as a result of these,” Bond said.“We support the Government’s proposals to put a cost cap on these loans. They’re very expensive at the moment and the cap will reduce the amount that people have to pay for these loans, and hopefully have less people getting into this debt trap.”
But the lesser known microfinance loans are growing in popularity. The NAB is signing off on 20,000 no interest loans this year.
“It’s a part of our corporate responsibility, and it’s a part of some of the biggest money we give away each year,” Hehir said.Contact details