There’s a community alternative to your bank or building society
If you want to save cash or you need to borrow some money then you’ll probably turn to a high street bank or building society, or maybe an online lender.
And if you’ve struggled to manage your money in the past and your credit score is a bit low then you might decide to approach a lender who specialises in poor credit loans.
Before you do that, though, it could be worth looking into your local credit union to see if they could help.
What’s a credit union?
It’s a sort of community lender where the members pool their savings so they can issue loans to other members.
All the members have something in common, perhaps they all come from a specific area or maybe they are all in the same industry. There are even credit unions set up via places of worship like churches.
These unions still behave like banks; they pay out interest on savings and charge interest on loans. Some offer extra services like ISAs.
But because there are no external shareholders, any money the union makes it used to improve services or reward its members.
Some are tiny community ventures and others are on a national scale, with thousands of members.
How do I know if a credit union is right for me?
You might like the idea of putting their money unto a local credit union, so that it’s helping provide safe credit to members of your community.
And your money is as safe as in a bank, thanks to the Financial Services Compensation Scheme. That reimburses up to £85,000 per person, per credit union, if the organisation does go under.
If you want to borrow money then a credit union may be able to help, as long as you are a member. Many exist in order to help their community save cash and borrow at an affordable rate.
How much will I pay for a loan?
By law a credit union can’t charge more than 3% a month, which works out at 42.6% APR. In Northern Ireland that cap is 1% a month.
However, the Money Advice Service says that most unions charge an average of 1% a month and there are no hidden charges like fees if you pay it off early. You might even be able to get extra support and advice.
What else should I know?
If you do borrow via a credit union you also get free life insurance, so if you died while you were still repaying the debt it would be written off.
But it’s important to remember that a debt is still a debt, even if it’s being lent via a community credit union.
So it’s a really good idea to only borrow money when you genuinely need to – and to make use of any savings schemes at the same time.
How do I find a credit union?
To find out whether there’s a credit union available to you, visit the Find Your Credit Union website.