My Home Finance, supported by the Department for Work and Pensions, Royal Bank of Scotland and 26 housing associations, has opened 10 branches in the West Midlands as part of a trial to curb the need for loan sharks and doorstep lenders. If sucessful the scheme could be extended to other areas and ultimately nationwide.

Currently around 2.5 million people borrow from doorstep lenders with interest rates of 200% plus. Borrowing from loan sharks, which an estimated 200,000 further people do, can be at rates over 2,000%!

Loan rates for the new organisation will be at 29.9%. This compares with credit card rates, which are considered high, of around 17%. The rate is unlikely to put people off as the scheme is designed for people who would be unlikely or unable to borrow elsewhere.

If the scheme is successful and rolls out nationally the rate could increase to 49.9% to cover costs. This looks likely to be in April next year. 

My Home Finance is also offering help with opening a bank account and debt advice for those that need it. Loans will need to be applied for in person so will only be available to local residents.

The idea seems similar in many ways to that of a Credit Union, who would normally charge interest rates below 15%, serving the local community where the big banks have let people down, leading to an increase in high rate borrowing.