Fair4All Finance and Great Western Credit Union announce a Consolidation lending partnership which will increase access to affordable credit and boost financial resilience across South West England
The new £1.3m financial package from Fair4All Finance, including a £100,000 partial bad debt guarantee and £1.2m lending capital loan, will support Great Western Credit Union to extend their existing consolidation loan product to customers they cannot currently serve.
We estimate that over 500 new customers will benefit from the product in the first 6-9 months after launch, and on average each customer should save at least £200 – £300 in interest, giving rise to the potential to save over £1m in the first year.
Currently, lenders tell us they consider consolidation lending products to be harder to serve , with greater concerns around bad debt, profitability and a distinct lack of direct settlement technology which ultimately impacts on the affordability assessment of potential borrowers.
Our £100k partial bad debt guarantee is focused on removing some of these concerns and helping lenders approve more consolidation loan applications.
We’re pleased to be working with Great Western Credit Union on this pilot which will see a reduction in their members monthly debt repayments as well as an increase in the amount of money that members are able to save each month.
Members of the credit union will be able to borrow between £500 and £15,000 to consolidate their debts as part of this pilot.
But it’s more than just financial wellbeing. The Money and Mental Health Policy Institute reports that 46% of people in problem debt also experience problems with their mental health, therefore we know that by reducing that debt, and allowing people to take control of their finances by reducing the stress associated with multiple loans and payments = we can make a positive difference to people’s mental health.
In addition, poor financial resilience and the associated stresses of large levels of debt can impair productivity at work and in extreme cases, may even leave people unable to work. Improving the financial outlook of individuals is therefore a key tool in improving growth and supporting people to lead full and productive lives.
At Fair4All Finance our mission is to increase the financial resilience and wellbeing of people in financially vulnerable circumstances by increasing the availability of fair and accessible financial products and services. One of the ways we’re looking to do this is by working with partners to develop and deliver new products and services, like accessible and affordable consolidation lending products.
‘We’re delighted to be working with the team at Great Western Credit Union to deliver this pilot. We know how important access to innovative products like this are to the millions of people in financially vulnerable circumstances across the country.
Consolidation lending is a great solution for the cost of living crisis. A consolidation loan at an affordable interest rate will reduce people’s monthly outgoings, and can even cut the overall interest over the course of the loan – the positive impact on people can be transformative and directly put money back into the pockets of those most in need.
By working with partners like Great Western Credit Union we hope to build a solid foundational evidence base for what solutions work and importantly deliver positive outcomes for those that need them most’
Kate Pender, CEO at Fair4All Finance
‘Consolidation loans are just one more way we can improve people’s financial wellbeing. Combining high cost debt into a manageable, affordable loan can put money back into people’s pockets helping them cope with the cost-of-living challenges we’ve seen over the last couple of years, as well as potentially saving them a fortune in interest over the long term.
Working with Fair4All Finance to develop our proposition has meant we can test new approaches, including lending to some who we might otherwise have struggled to approve.
We’re looking forward to seeing how this pilot develops, and to building the business case that will demonstrate the long-term positive outcomes for consumers that we are aiming to deliver.’
James Berry, CEO at Great Western Credit Union
This is just one example of the work we’ve been doing in the consolidation lending space and we’re working with other lenders, both commercial and community finance, to deliver more projects.
Recently we partnered with ClearScore to develop a unique debt consolidation loan technology. ‘Clearer’, the proposition from ClearScore, allows for the direct settlement of consumer debts which unlike most other debt consolidation loans, eliminates the risk that the funds are not used to pay off existing credit cards and loans.
