Credit unions
Credit unions are financial co-operatives owned and controlled by their members.
What do they offer?
- A safe and convenient way to save
- Easy-to-access loans at low rates of interest
- Free life insurance on savings and loans.
There are no shareholders to pay and Credit Unions can offer services to everyone in the community.
How is a credit union different from a bank?
Banks are owned by private shareholders, who share all the profits. Credit unions are different. They are owned and controlled by their members, who employ a small team of paid staff to run things for them. After meeting the running costs, all profits are shared out to members in an annual dividend. So the money stays local and in the pockets of members.
Isn’t my money safer with a bank?
Since July 2002, credit unions have been regulated – like banks – by the Financial Services Authority (FSA). This means that there are strict rules about how credit unions are run to meet the FSA’s standards.
Also, like banks, credit unions are covered by the Financial Services Compensation Scheme, so your money is 100% safe if anything were to go wrong.
Can credit unions help everybody?
Credit unions can offer affordable financial products for people with few other options. They do their best to make sure everyone in the community can join and are not excluded because of their circumstances.
Credit unions are also a great choice for everyone because they often pay really good rates of interest and offer competitive interest rates on loans. Many people see credit unions as an ethical option compared to the high street banks because all profits are returned to their members, helping retain money in the local community.
How will joining benefit me?
- Good rates of interest on your savings
- Low interest rates if you take out a loan
- Free life insurance on your savings and loans
- No regular bank charges
- A friendly, professional and local service
- An ethical and safe alternative to high street banks.
How would I get a loan?
If you currently borrow from places like home credit companies (such as the Provident), pawnbrokers, money shops, hire purchase shops - then you should see how much you could save by borrowing from your local credit union.
Most credit unions have loan products that allow you to apply for loans immediately, once you have become a member.
Some credit unions loans will cost you no more than an Annual Percentage Rate (APR) of 12.7%. What this means for example is that if you borrowed £1000 over 1 year, you would repay no more than £1067 in total. Many credit unions charge less; some may charge more but by law this cannot be more than an APR of 26.8%.
Credit union loans come with no hidden charges and no penalties for repaying the loan early. Life insurance is built in, at no cost to the borrower, so if you were to die before you had repaid the loan, the insurance would repay the loan for you.
Who can join?
Credit union members have to come from within its ‘common bond’. This means that credit unions generally allow anyone who lives or works in their catchment area to join. This also includes people who are studying or volunteering in the area.
What is involved in joining?
To join the credit union, you have to fill out a membership form and provide evidence of your identity and your home address. There may also be a small joining fee.
You can then begin to save regularly – as much or as little as you can afford and also access affordable loans.
For further information:
If you want to know more about credit unions, or to find out if there is a credit union in your area, please contact:
ABCUL (The Association of British Credit Unions)
Holyoake House, Hanover St, Manchester, M60 0AS
Tel: 0161 832 3694
Email: info@abcul.org
Or visit the ABCUL website
You can also find out more about credit unions on the Money Advice Service website.