Families Bridge The Gap With Credit Union Loan Scheme
Credit unions understand that the cost of everyday family life can be difficult to manage.
Holidays, Christmas, birthday parties and school uniforms can all add up to become significant financial outgoings.
That’s why many credit unions across Wales have introduced a Family Loan which allows members on benefits to borrow money responsibly and help pay for those financial outlays.
Those who access a Family Loan – which start at around £100 – can pay it back through their Child Benefit payments.
Newport Credit Union introduced Family Loans a few years ago to give people a better alternative to high interest lenders.
Newport Credit Union General Manager Ben West explained: “We wanted to put a stop to doorstep lenders in our communities and replace them with the ethical and fair qualities of the credit union.
“The Family Loan not only helps bridge the financial gap but helps people save their money for themselves and their children – possibly for the first time.
“So, each time a Child Benefit payment was made, a percentage would be used to pay off the existing loan and the remainder would be saved into an adult and a children’s account, allowing them to put some money aside for the future.”
If a member borrowed £300 over a year then it was repaid at £10 per week with £7 paying off the loan, £2 being saved by the adult and £1 saved by the child.
“At the end of the term they have not only paid off their loan but have £150 in savings, whereas if they’d gone to Provident they would have still been in debt,” Ben added.
Currently around 380 families are paying their child benefit payments into a Newport Credit Union Account with 350 of them using it to pay off a loan.
As ethical saving and loans providers, credit unions are committed to their members and will only offer affordable loans to those who they believe can adequately repay them.
That means members are not treated as a credit score and despite being turned away for a loan from other high street institutions, may still be able to borrow from a credit union.
Chief Executive of Cardiff & Vale Credit Union Leanne Herberg said: “As a credit union, we use savings to offer affordable loans to other members which benefits the economies of communities across our region.
“People on low income who may find it difficult to pay for home improvements, school uniforms and possibly a holiday will benefit from the Family Loan rather than become a victim of the more unscrupulous loan providers.
“Family Loans have become a very easy way for people who claim child benefit to take out a loan with us.”
Credit Unions offer affordable loans at reasonable rates. This helps deter people from turning to high interest organisations such as Provident, rent-to-buy groups like Brighthouse, payday lenders or even loan sharks.
For instance, a £500 loan from Cardiff & Vale Credit Union over one year at an APR interest rate of 41.1% will mean that the borrower repays £594.24 in total.
This is compared to Provident who will loan the same amount over the same period at 535.2%*. The repayments will be almost twice as much as the credit union and the over-all sum repaid will come to £1,162.76.
*Loan rates correct at time of writing – June 4, 2019.