There are large differences in interest rates between municipalities in social loans

Interest rates on social loans vary greatly from society to society. Loans from municipal loan banks are aimed at people who do not have sufficient income to get a loan from a local bank. In case of emergency, for example when the washing machine breaks down, you can apply for social credit.

Anyone who receives such a social loan from the credit bank in Nijmegen pays 2.4 percent interest. In Groningen, this value is more than three times higher: 8 percent. This saves 67 euros on a 600-euro loan to be repaid in two years. This is a huge amount of money for the group for which the loans are targeted: people who have to get by on low incomes.

Sudden financial need

Community loan banks are there to alleviate sudden financial needs. A faulty washing machine is often given as an example, but a loan can also be applied for other unforeseen expenses.

Most loan banks have an income limit for granting loans. For example, 130 percent of the minimum wage. If you earn more, you cannot contact the credit bank.

For this reason, the interest rates of people who can go to a loan bank are also quite different. The reason for this is the contribution of the municipality.

Groningen Municipality announced that it decided on an 8 percent interest rate “because the costs must be covered at a certain rate.” Therefore the local credit bank needs to partially finance itself.

Nijmegen’s average interest rate for commercial banks is 2.4 percent. “This is around 6.4 percent. “The council decided to deduct 4 percentage points from that,” a spokesman said. “This social policy decision was made about ten years ago.”

private welfare

Municipalities can also help low-income people with financial problems in other ways. Utrecht does not offer social credit but does offer an additional advantage. “When people come to us with a broken refrigerator or similar problem, we always provide a solution with personalized help. “This is a gift, not a loan,” says a spokesperson. “If you need to get a loan in exceptional cases, we offer it interest-free.”

In addition to social loans, the Städtische Kreditbank in The Hague also offers mortgages to people who cannot turn to commercial mortgage providers. “To our knowledge, The Hague is the only municipality to do this,” a spokesman said.

Differences

The widely varying interest rates on social loans fit with the idea that for people with money problems, where they live matters. The social minimum committee had previously recommended that the cabinet limit the differences in support between municipalities.

“We did not comment openly on interest rates,” says committee member Nadja Jungmann, a lecturer in debt and debt collection at Utrecht University of Applied Sciences. “However, it would be very logical to strive for greater uniformity in this area as well. “Especially for those on the lowest incomes, a few percent can really make a difference in whether you can afford to buy something extra for the holidays, for example.”

Source: NOS

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