Credit unions are designed to allow people within a particular organisation or community save up money and borrow extra finance when they need it most. Within the UK at this time, there are hundreds of different credit unions, which means that almost everyone will have access to at least one. There are also a host of different work-related credit unions available. For instance, for NHS employees, employees in the transport industry, and trade union members.
Until around 2012, the credit unions that we know today were somewhat hampered by restrictions that meant each of their members had to have some kind of common bond, such as working for the same employer or living within a specific geographical area. However, today, credit unions aren’t required to make sure that all of their members have a specific characteristic in common. That means that all credit union solutions generally grow and be offered to new groups with greater ease.
How Do Credit Unions Really Work?
In simple terms, credit unions are controlled and owned by their members, so there are no outside shareholders that not to be paid off. These unions are run almost exclusively by volunteers that have been elected by the full membership, and any profit that is made by a particular credit union will be used to develop the organisation and offer a greater return to those involved.
Loans taken from credit unions are often much less expensive than the loans that can be obtained from other providers when it comes to small amounts of cash and they generally don’t have any fees for setting up, early-redemption fees, or set-up fees either. For instance, many credit union loans will cost around 1% a month on the reducing balance of a loan.
Of course, there’s always the possibility that some credit unions will charge more in interest than the standard, though the law dictates that the amount of interest charged by any credit union can never be more than 3% in any given month.
The Advantages of Credit Union Loans
Credit union loans offer a host of great advantages which make them particularly competitive in comparison to other bank and building society lending schemes. For instance, credit unions offer competitive rates on small personal loans, and can generally provide finance for smaller amounts than other standard loans. Additionally, the interest paid is charged on the reducing balance of the loan, which is great for people who want to pay on a weekly basis and limit the amount of interest they pay overall.
When you borrow money from a credit union, you can pay back the finance that you have obtained from numerous different channels, including options taken straight from your wages through a payroll deduction, or through benefits. Credit union loans also avoid any hidden charges or penalties that might be imposed by banks or building societies if you choose to repay the loan early. If someone chooses to take money from a credit union in a loan they will usually be encouraged to save in the same place. This usually means that by the time you have finished repaying your loan, your savings will have accumulated more too.
Who Should Get a Credit Union Loan?
Typically, credit unions are happy to lend out small sums to different people, but they’re also more commonly providing larger amounts of credit for larger purchases, and even mortgages in some cases. Most commonly, credit unions will only provide personal loan options for a period of up to five years, or ten years when the loan has been secured on the property of the borrower. However, some unions are able to offer finance for up to ten years, on unsecured loans, as well as 25 years of lending terms for secured loans.
In the past, if you wanted to borrow money from a credit union you would need to have had a history of saving with that union first. However, today, most unions will not insist on this background to give you access to credit. If you have any questions about the rules and regulations of your credit union, it’s best to ask them yourself and gather as much information as possible before lending any money.
How to Find your Credit Union
In order to obtain a loan from a credit union, or even begin saving with one, the chances are that you should consider your options carefully. In the past, you needed to choose a union that was connected to your employer, organisation, or where you live and work. However, the law has now changed to allow credit unions to act more flexibly in the way that they serve credit. Unions often have some restrictions in place for memberships, but they also now have the power to change their rules and make changes to the concept of a “common bond”.
Simply head online and type in your local area name alongside “credit union” to start finding out what’s available to you.