Iceland now offers interest-free loans if you're struggling with the cost of living - but be careful as they will impact your credit score

The scheme, dubbed "Iceland's Food Club" has been launched in partnership with not-for-profit organisation Fair For You, which is administering and part funding it. It follows a successful trial of 5,000 users. It is, however, unclear how long this new scheme will last for or how many people will be able to use it. 

We explain everything you need to know below but, if you're already struggling with debt, see our Debt help guide.

Borrowers can get up to six loans a year worth between £25 to £100

Here's how they work:

• Your first payment will be between £25 and £75 paid to you via a prepaid top-up card. If your application is successful, the card will arrive by post five to seven working days after applying. The amount lent depends on what you requested and your ability to pay it back. 

• The credit can only be spent at Iceland. But it can be used both in store and online.

• The loans are interest-free. This means you won't accrue interest on top of the initial balance lent - even if you're late making repayments.   

• You can apply for one loan at a time, and a maximum of six loans over the course of a year. These can be anything up to £100, though to borrow more your current loan balance will need to be £75 or less, and you can't have defaulted on previous loan repayments.

  Your first loan can be taken out at any time, and you'll be given windows throughout the year to apply for additional payments. These windows are linked to the school holidays. The current window closes on 4 September and the next window will open on 17 October.

• Repayments are made weekly and are set at £10 a week. You begin to pay the loan back the week after you receive the card, though you can choose which day money comes out of your account. You can choose to pay more than £10 a week back. 

• You need to give your debit card number so Fair For You can take repayments. These are done via a continuous payment authority, so they're taken from your debit card until the loan's paid off. 

Loan applications and missed payments will be reported on your credit file

When you apply for an Iceland food loan, Fair For You will perform a hard credit check that will go on your credit file (you can use Fair For You's eligibility tool first to check if you're likely to get the loan, without affecting your credit file).  

Yet if you miss a weekly repayment, that will be recorded on your credit file and is likely to be a red flag to other lenders, meaning you could find it more difficult to get credit in future. 

In addition, if you miss four consecutive repayments and Fair For You or Iceland cannot get in touch with you within 30 days, you'll be sent a letter warning you about the repayment defaults. A fee, which is currently set at £9.50 (but is subject to change), will be charged to cover the cost of this letter. 

If you know you’re going to miss payment deadlines, contact Fair For You as soon as possible. It may be able to set-up a repayment plan for you. 

'Be very careful before applying for loans for everyday living costs'

If you're struggling to pay for food, check if you're getting all available help 

Here are some options to consider - you can also visit our Cost of living support hub for further help: 

• Use our Benefits Calculator to check you're not missing out on vital support. Even some families with an income of £50,000 or more can qualify for help and it only takes 10-minutes or so to check. 

• Check if you're entitled to income-support grants by reading our Grant grabbing guide. Charities, the Government and even companies often have funds which are available to help, especially if you've got children.

• If you're struggling with grocery costs, see our How to get free (or cheap) food guide. Our Supermarket coupons round-up and our Supermarket shopping tips guide are include information on cutting food costs.

• For those who need debt support, see our Debt problems and help available guide. The earlier you tackle your debts, the easier they are to deal with. Our guide shows you where to start and how to get free one-on-one help.