A local council has agreed to give financial support to a credit union helping those on low incomes raise a deposit for a home.

Ashford Borough Council will back Maidstone-based Kent Savers in a bid to stop people turning to pay day loan companies, or finding themselves homeless.

The council’s cabinet accepted a recommendation from its overview and scrutiny committee to give a subordinated loan of £10,000 to Kent Savers, with interest waived, and also to work closely with the credit union to help prevent homelessness in the borough.

A subordinated loan ranks below other loans in regard to any claim on assets or earnings. In the event that an organisation becomes insolvent, any subordinated loans issued to it would only be eligible for repayment following the payment or all other corporate debts and loans. The purpose of the loan is to allow the union to increase the value of its loan book and so help more people in the Ashford borough.

So far, Kent Savers has £316,000 loaned to nearly 4,000 members. Around 216 of these members live in Ashford.

Credit unions are non-profit-making cooperatives whose members can borrow from pooled deposits at low interest rates.

Deputy leader of the council, Cllr Neil Bell, said: “Credit unions have an important part to play in allowing residents with a poor credit history to rebuild their credit scores. This in turn may allow them to regain access to the full range of financial services in the marketplace and all the associated benefits.”