The Tenancy Saver Loan scheme is open to private rented sector tenants in rent arrears and families who may struggle to pay their rent in the future.
The loan, which is offered at one per cent APR, is paid directly to landlords or their agents to cover existing rent arrears and future months’ rent to reduce the risk of tenant evictions.
The loan can be repaid over a period of up to five years.
Once a tenant has applied for the loan they will be able to access support and advice services to help them manage their financial situation.
The loans will be provided by seven credit unions across Wales.
The credit unions will work with tenants to find out if they are eligible for the loan scheme and how much they can afford to repay.
If the scheme is suitable for the tenant, the credit unions will provide them with support for the duration of the loan repayment term.
Julie James, minister for housing and local government, said: “We recognise the constant pressure that the coronavirus is putting on tenants and landlords.
“While we have already taken steps to alleviate some of this pressure, such as extending the temporary six month notice period for eviction and funding Citizens Advice Cymru to deliver the Early Alert Scheme for rent arrears and other household debt for tenants, we want to go one step further.
“We are committed to ensuring no-one is made homeless as a result of the pandemic and this scheme is part of our long term strategy to help people manage their debt, prevent homelessness and where it cannot be prevented ensure it is rare, brief and non-recurrent.”
The scheme is open to applications until 31 March 2021.