Credit unions

Last modified 27/08/09 at 10:17

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

With no shareholders to pay, Credit Unions can concentrate on providing better and cheaper services than banks or building societies. They can also offer services to everyone in the community.

Credit Unions are so successful that there are over 100 million members in 84 countries worldwide and are especially popular in Ireland, America and the Caribbean. In the UK, there are more than 700 credit union, with over 500,000 members.

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, not ‘fat cat’ shareholders.

Isn’t my money safer with a bank?

Just because Credit Unions are run by volunteers, doesn’t mean they are less secure than a bank. In fact, since July 2002, they’ve 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 their 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.

Aren’t credit unions just for poor people?

It’s true that Credit Unions 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.

However, 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 the credit union as an ethical option compared to the high street banks because all profits are returned to its members, helping retain money in the local community.

How will joining benefit me?

Credit Union offers you:

• Good rates of return 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 alterative 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, higher purchase shops (such as Bright House) – 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.

The interest rates normally vary depending on how long you have been a member and how much you wish to borrow. So for example, borrowing £500 over 12 month, the maximum you would pay in interest is £67. Loans would be even cheaper if you also saved with the Credit Union or have repaid previous loans.

There are no arrangement fees, no hidden costs and no penalties if you decide to pay the loan back early – so the quicker you pay back your loan, the less you have to pay.

Who can join?

Credit union members have to come from within its ‘common bond’. Credit Unions generally allow anyone who lives or works in their catchment area to join. This also includes people who are studying or volunteering.

What’s 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 is also 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.

Want to know more?

There are a number of Credit Unions across London. For more information about Credit Unions, or to find out if there is a Credit Union in your area contact:

ABCUL (The Association of British Credit Unions)
Holyoake House,
Hanover St
Manchester,
M60 0AS

Tel: 0161 832 3694
E Mail: info@abcul.org
Website: www.abcul.coop