Credit unions – what are they and what can they do for you?
When looking to raise finance by way of a loan, high street lenders are normally our natural choice. However, Credit unions can be a viable alternative, possibly providing cheaper credit and at the same time helping others in your community.
What are credit unions?
A Credit union is a member owned financial cooperative that offers financial services to its members. There are approximately 500 credit unions in the UK and they are generally community or work/trade union based, serving around 1 million members.
Who can use the services of a credit union?
If a credit union is work or trade union based then they will normally be restricted to the relevant group of people or their families. If the credit union is community based then access would be available to members of that particular community.
What services are offered by a credit union?
Normally credit unions offer savings accounts and personal loans but may also offer credit cards and other services. Credit unions are 'not-for-profit' organisations that are self funding through deposits made by members, these are then lent as loans to other members. Both saving and lending rates are often lower than mainstream banks with investors using them to assist their communities rather than to maximise their investment return. All deposits are covered by the Financial Services Compensation Scheme up to £85,000 per person with each credit union.
What are the benefits of using a credit union rather than a normal bank?
Generally any loans you may arrange are at a lower interest but tend to be for smaller sums of money. However, you will not enjoy the comprehensive service provided by normal banks such as online banking, ATM system or 24/7 phone service. Credit unions are also a viable and much less expensive alternative to using payday loan companies.
How can I find a credit union in my area?
There is an online search facility here - www.findyourcredit union.co.uk just put in your postcode and you will get details of credit unions in your area.
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