Loans – Why more of us are turning to credit unions
Article by Michael Challiner
These days items of not just want, but need, tend to be becoming more and more expensive and with interest rates constantly rising at the banks, credit unions are becoming the more financially attractive alternative.
Credit unions are financial co-operatives owned and controlled by their members who combine savings to offer low-cost and flexible financial products to their members.
Each union has a ‘common bond’ which determines who can join. A ‘common bond’ is simply having something in common with the existing members such as living or working in the same area, work colleagues or people who belong to the same association, such as a church or trade union.
If you are not able to save every week or month or have a poor credit record, a credit union may be more sympathetic to your needs than a larger financial institution would be.
Credit unions welcome irregular savers, and all savers usually get the same percentage dividend on their savings aiming to pay a dividend on savings once a year to all their members. This can be as much as 8% of the amount that people have saved, but is typically 2% or 3% depending on profits.
As mutual societies, credit unions are non-profit organisations and must each year set aside enough money to ensure they remain financially stable. All profits are used to make interest rates as cheap as possible for borrowers and rates of return attractive for savers.
With a credit union you can save as much or as little as you like, weekly, monthly or as often as you wish. You can pay in at convenient local shops or collection points, or direct from your wages.
You do have to prove you can save before you can take out a loan with a credit union. Once you have satisfied this requirement, the total amount you can borrow from your credit union is based on what you will be able to repay. They can also tailor their services to suit your individual circumstances.
The interest a credit union can charge on a loan is limited to 1% a month. So a loan of