A credit union lets members pool their savings to provide a low interest loan for those who need it. Members of a credit union usually share a common bond with other members.
This could be something as simple as working or living in the same area all working for the same employer. Whatever the common ground is, credit unions are a co-operative self-help answer to the rising cost of borrowing money.
Credit unions will usually have a common Bond comma or maybe more than one if the union’s rules allow. Bonds can be based on community organizations like social clubs, local churches or other local organizations. If a member of your family is already a member of the credit union, other relatives living at the same address can usually join too.
Where can I find a credit union?
Each individual credit union will have its own rules and guidelines which dictate who is allowed to borrow money and how much. You can get information about credit unions from the ACE Credit Union Services or the Association of British Credit Unions (ABCUL).
Getting a loan from a credit union
Generally speaking, credit unions charge a low rate of interest. Credit unions tend to charge no more than 3% each month. Once you know the right you are being offered it will be easy to work out what your monthly repayments will be and how much the line will cost you in total.
Usually, credit union loans will work out much cheaper than a traditional loan or a payday loan. This makes credit unions a great choice for anyone who can’t afford a traditional loan.
What happens if I can’t repay?
If you cannot repay your loan, the credit union you have borrowed from may cancel your membership and take you to court. It is important that before you take out a loan you know how you will repay it.
If you start to struggle making the repayments on your loan, the first thing to do is getting in contact with your credit union. Explain the situation to them and they may be able to support you in creating a better loan repayment plan or even offer you some support like pausing or reducing your payments for a limited time.
Credit unions are very often willing to adapt to meet the needs of their borrower. If you are waiting for a payment or have a gap in between jobs, many credit unions will be happy to pause your account in order to let you pay off your loan in a way that works for you.
If you’re struggling to repay a loan of any kind it is worth seeking financial advice from a professional financial advisor. Some charities will even offer free financial advice to those who are struggling.