Many of you may not have come across a Credit Union but there are in the region of 500 of them around the UK.
What is a Credit Union?
It is a type of non-profit making co-operative set up and operated by members for the benefit of its members. Those members usually have some “connection” with the Credit Union although this need not always be the case.
For instance, it could be set up in a particular town or city and allow anyone living in the locality to become a member. It could be set up for the employees of a specific employer such as the police force. It could be set up by a church or trade union.
It could provide an alternative to a bank, building society, doorstep lender or payday lender should you be looking for products such as savings, loans or bank accounts. Bad credit may not necessarily prevent you from being considered for a loan or a basic current account so it may be worth considering approaching one.
Reassuringly, each member is protected for up to £85,000 of savings by the Financial Services Compensation Scheme (FSCS).
Credit Union Bank Accounts
A limited number of the larger Credit Unions offer a basic current account although they do not provide a chequebook or overdraft facility. You can have your salary and other income paid in, pay your regular bills by direct debit or standing order and use a debit card to withdraw cash and make purchases.
Credit Union Savings Accounts
You can save in one either on a regular basis or just pay in periodic lump sums. The interest rate or dividend is sometimes greater than that of a bank or building society.
Credit Union Loans
Loans are only made available to its members. Some insist that if you want a loan from them then you must also save with them on a regular basis. They will take into account a number of factors when applying for a loan such as your income/expenditure to assess your ability to be able to afford the repayments. The amount borrowed could range from a few hundred pounds to several thousand. The interest rate may vary between Credit Unions but you should expect to pay considerably less than that charged by payday and doorstep lenders. Loans may be available on an unsecured or secured basis. The term may be anything from a few months to 5 years on an unsecured basis and up to 10 years on a secured basis.
So, if you are seeking a loan, want to save some money or open a basic bank account then you may wish to look into whether you qualify to become a member of a Credit Union. If you do, you may wish to consider the products available in comparison with what other financial institutions are offering.
Just because you may have a bad credit history does not mean that you cannot get help with the likes of a basic bank account or a loan from one of them.