Iceland loans: what is Food Club scheme in partnership with Fair For You, how to apply, how much can I borrow?

The UK is currently going through its biggest cost of living crisis for decades.

It is a fact that has been brought home by new Office for National Statistics data, which has shown salaries have dropped by a record amount in real terms due to high levels of inflation.

With consumers expected to take an even bigger hit this autumn when the Ofgem price cap is forecast to rocket once again, charities have urged the two candidates vying to be the next Conservative Prime Minister to introduce more support for vulnerable people.

Some private firms are also seeking to help, with the supermarket Iceland announcing a partnership with Fair For You so that shoppers can access micro loans towards groceries during school holidays.

The retailer has already announced a discount for older people and vouchers for pensioners, while also continuing its 1p sales.

So how will the Iceland Food Club scheme work?

Here’s everything you need to know.

What is the Iceland Food Club?

Iceland’s Food Club scheme is a lending initiative that aims to provide financially vulnerable customers with interest-free micro loans towards their food shop.

The supermarket says people might need these loans to help them bridge gaps in their income during school holidays.

It is run in conjunction with Fair For You, a charity-owned ethical lender that aims to support households that have been “financially-excluded” with the purchase of key necessities.

These people may be unable to secure other loans because of a poor credit rating.

Originally a pilot scheme launched in 2020 in Yorkshire, the North West and Wales, the Food Club became a UK-wide initiative on 16 August 2022.

Iceland said in January 2022 that it had already given out more than £1 million in micro loans to more than 5,000 customers during the pilot.

The scheme has been backed by the UK government, social innovation charity Nesta and community charity the Esmée Fairbairn Foundation.

How does Iceland loans scheme work?

Iceland Food Club allows all consumers to receive loans of between £25 and £100 that can be used towards buying groceries at Iceland during the school holidays.

This money is held on a pre-loaded card operated by Fair For You.

To get one, you have to apply to the ethical lender on its website.

It will then run an affordability check on your finances, with checks potentially completed in as quick as an hour.

Should your application prove to be successful, Fair For You will email you with a confirmation and it will then take five to seven business days for your card to arrive.

Initially containing an amount between £25 and £75, the cards can be used to buy anything in-store in Iceland or online at the supermarket.

They can also be topped up six times a year to a maximum limit of £100 through Fair For You’s digital dashboard.

You can only take out one loan at a time within the six top up periods - all of which are timed to coincide with school holidays.

Fair For You says it will notify its Food Club members when they will be able to top up.

Repayments are set at £10 per week, and you can decide which day of the week they will be taken out of your account on.

You are allowed to repay more if you wish.

If you’re struggling to keep up with these repayments, Fair For You says it will work with you to make it easier.

All the loans are interest free, which means you only pay back the figure you borrowed through the scheme.

This practice is different from those of most commercial lenders, who will add interest to repayments to protect the value of the money they have loaned out.

What has Iceland MD Richard Walker said about Food Club?

Iceland boss Richard Walker said he hoped the new Food Club scheme would help consumers across the UK.

“More than ever, people are struggling to purchase much needed everyday items during this relentless cost of living crisis, and fresh thinking is required by business and government to find workable solutions,” he said.

“At Iceland, we’re constantly exploring new ways to help our customers with innovative solutions that deliver real impact.

“With Fair for You, we have rolled out Iceland Food Club to offer our customers even more support, helping them manage essential spending on their own terms.

“To those striving to worry less about how they will afford essential goods, this ethical credit scheme delivers real help when most needed and I believe it will make a valuable contribution to breaking the cycle of food poverty in this country.”

An independent evaluation of Iceland’s pilot scheme by the Centre for Responsible Credit found Food Club allowed 92% of the people using the micro loans to stop or reduce their food bank usage.

Another 71% of the consumers it surveyed said it had helped them to keep up with rent, council tax and other household bill payments.