A new lending scheme has been set up across the West Midlands in the hope of making loans available to the financially excluded, and hopefully providing debt relief to those who might need to resort to dubious loan sharks or even illegal methods for a cash boost.

The National Housing Federation has set up the 'My Home Finance' scheme which is currently in its pilot phase, as a not-for-profit attempt to divert borrowers away from loan sharks and other dubious short-term debt solutions.

The interest rate being charged is however significantly higher than that which credit unions can legally charge.  Credit unions are set up to encourage those on low incomes to save money, and are allowed to charge no more than 26.8% APR, while most charge around 12.7% APR.

The new scheme will charge 29.9% APR during the pilot phase, which rises to 49.9% APR during April.

10 branches will initially open across the West Midlands.  Applicants will be required to undergo a 45-minute interview to check how realistic it would be for them to be able to repay their loans.  Available sums would be around £500, with weekly payments required.

Borrowers and would-be borrowers will also be offered debt advice and other assistance in the hope of wising them up to the dangers of loan sharks.

NHF chief executive David Orr said, "By offering fair loans at fair prices, we hope to offer an alternative to both loan sharks, who cynically prey on hard up families, and doorstep lenders, who are all too willing to lend cash to the desperate at hugely inflated rates of interest,"