THE Government will trial a no-interest loan scheme to help low-income households pay off any unexpected debts.

It has promised £3.8million for the pilot programme to stop vulnerable Brits from falling further into debt.

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While The Chancellor didn't address the scheme in the Commons this afternoon, details were buried in Budget documents.

The Government says the short-term loans would be handed out to help cover any unexpected costs, such as falling behind on rent due to a loss of income.

The loans would support vulnerable customers who would otherwise have to rely on high-cost credit to get them through.

Borrowers who are turned away from traditional high street lenders, for example because they have a poor credit history, often turn to creditors likedoorstep lenders, which charge sky-high interest rates.

How to cut the cost of your debt

IF you’re in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.

Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money

Work out your budget – by writing down your income and taking away your essential bills such as food and transport
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs

Pay off more than the minimum – If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker

Pay your most expensive credit card sooner – If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)

Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them

Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay

Get advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further

Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans

The extra charges can often leave households spiralling further into debt.

The Sun's Stop The Credit Rip-Off campaign calls on regulators to put a cap on the total amount repayable to doorstep lenders.

A Government-funded interest-free loan would reduce the risk of borrowers struggling to keep up with interest charges.

It would mean Brits only have to pay back what they borrowed.

Wales already offers a similar scheme to tenants who have fallen behind on rent due to the coronavirus crisis.

Customers can already get help from private firms like the Bank of Mum and Dad, which offers 0% loans of up to £1,000.

The Government is yet to release further details on the scheme, such as who is eligible, how much the loans are worth and how long borrowers will have to pay it back.

The scheme was first floated last year, but the Treasury has been dragging its feet on getting started.

Debt charity StepChange, which has been campaigning for the scheme, said that while the commitment was positive, the Government needs to "urgently scale up the concept".

Richard Lane, director of external affairs at the charity added: "In particular, we need the Government to create a system of grants and interest-free loans that will allow renters to deal safely with arrears built up over the course of the pandemic.

"Without these types of support, the Government risks hampering the ambitious plans the Chancellor has set out for economic recovery."

People on Universal Credit can get extra help though a budgeting loan or advance payment.

Today, the Chancellor announced it would be extending the £20 a weekUniversal Credit uplift for six months.

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