Borrowing from a Credit Union
There are many different ways to look at your finances and to borrow money when you need it. Whether you are looking to apply for a mortgage or personal loan through a traditional high street lender, take out a payday loan to cover the cost of short-term expenses, or you are looking for something a little different in the form of a credit union, there are plenty of options open to you. Being fully informed with whatever financial choice you make is important to ensure you have a solid financial foundation for your future.
Credit Unions are a community savings and loan cooperative, where members pool savings to enable lending to one another. A cooperative is an organisation that is owned by, and run for, the benefit of the members using that particular service. With a Credit Union specifically a loan can have a maximum legal interest rate of 3% per month (42.6% APR). Credit Unions are a popular choice of lending stream the world over, and can help communities to save and to allow lending at a lower rate than you might experience through other sources of credit. There are over 40,000 credit unions in 80 countries, with popularity in a country such as Ireland demonstrated with 70% of the population belonging to a credit union.
You might choose to go to a credit union because you are looking for a loan at a low interest rate, or because you are in need of financial assistance and impartial advice. Credit Unions are a fantastic way to incentivise all people to regularly save money, as they know that one day, they might themselves be in need of a short-term loan, and the Credit Union will be in a position to help.
A Credit Union will always act in the interests of its members, ensuring that only those members who can demonstrate that they can definitely afford to pay back the loan are given access to the funds. The cap on interest is also a massive positive to using a Credit Union for a loan. All Credit Unions are regulated by the Financial Conduct Authority (FCA) in the UK, ensuring fair and legal lending at all times.
In order to apply for a loan through a Credit Union you must be a member, and in some cases you will have first had to put in some savings before granted access to a loan. Most Credit Unions can lend up to five years, with some offering between 10 and 25 years on secured loan, depending on the circumstances.
Always conduct thorough research in Credit Unions before applying for a loan. As stated above, some will expect you to have put in considerable savings before you can be deemed a worthy recipient of a loan, but in some cases you might be able to successfully apply for a loan if you are a member only and have not yet put any savings into the Credit Union. Always be sure that you have the means to repay a loan, as the repayment agreement works in the same way with a Credit Union as it would with a payday loan company or a high street bank.