Why Should You Borrow From A Credit Union?
Credit unions typically offer lower fees, higher savings rates, and a more hands-on personalized approach to customer service to their members.
In addition, credit unions may offer lower interest rates on loans and, it may be easier to obtain a loan with a credit union than a larger impersonal bank.
Credit unions are non-profit financial organisations, traditionally set up by members with some kind of community in common – be it where they live or their profession. But this is changing.
As community savings and loan cooperatives, where members pool their savings to lend to one another, credit unions can offer very competitive rates of interest on personal loans.
There’s also a cap on the amount of interest they can charge on their loans of 3% a month or 42.6% a year APR.
Most credit unions are happy to lend small sums, from as little as £100, but an increasing number are also providing larger-sum credit for of up to £15,000.
You will need to be a member of a credit union before you can get a loan from them and some will require you to build up some savings first.
Interest is charged on the reducing balance of the loan which is important if you want to repay your loan weekly rather than monthly, because you’ll pay less interest overall.
When you borrow from a credit union, you can pay it back in several different ways, although some credit unions might not offer all methods:
• by making payments face-to-face
• by Direct Debit from your bank account
• through you wages at work: if your employer has links to the credit union you can pay back your loan by having money taken straight out of your wages
• through Paypoint.
• direct payments from your benefits
Credit unions also include free life insurance at no extra cost – so if you die before repaying the loan, the balance would be paid off for you.
Credit unions are authorised and regulated by the Financial Conduct Authority. Just like ordinary savings accounts, they are fully covered by the Financial Services Compensation Scheme (FSCS) up to the standard limit of £85,000 per individual.