Is the end of the Crisis loan in the UK causing the increase in use of food banks?

Posted in News About Loans For People With Bad Credit

A crisis loan was often used as a last resort to cover financial crisis for those financially vulnerable with no access to funds

Recent reports have shown that there has been a dramatic increase in the amount of people using food banks, as they are unable to cover essential costs, such as their weekly shop.

Prior to May 2013 in the UK, those on benefits that were demonstrating financial poverty

due to unforeseen circumstances – were often referred and then approved for a interest free crisis loan. These loans were at an average of £50 and were repaid through the borrowers benefits.
For many in the UK, being approved for a crisis loan was a last resort to source finance in a crisis, such as food shortage, to pay for essential home items or to pay for essential items such as gas or electricity.

Although there are options available such as food vouchers or food bank referrals,

There isn’t the availability of the crisis loan to cover a crisis money wise. There will be limited grants available but these will depend on where the applicant lives and how long they have lived in the area, a model which is becoming more similar to the American Welfare System.
Tristram Hunt, Labour MP for Stoke-on-Trent Central, said: There’s something that makes me instinctively very wary about the move towards food stamps and vouchers.
It’s more and more like the American welfare model with different services in different states. The consequences can be poor provision and a race to the bottom.

Another worry is that vulnerable people in desperate financial crisis

are at risk of falling into the trap of payday loan lenders or fall prey to even more detrimental options, such loan sharks who prey on the financially vulnerable and use extremely negative tactics to recover their money.

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