Credit unions are a saving grace for many people struggling with debt, and are unable to to acquire credit. They also offer very competitive rates, which enables them to compete with high street lenders.
What is a Credit Union?
Credit unions are non-profit organisations which specialise in providing loans to those with financial hardship. As there are no shareholders involved, customers can get very competitive rates, compared to the traditional lenders who have possibly already refused them. They are run by their members, and the members are usually united by a tight bond such as living or working in the same area.
The UK currently has around 500 unions, but only 2% of the population is using them. As such, during these times of austerity, the government is trying to raise awareness about their existence. You can find your nearest credit union via findyourcreditunion.co.uk, along with details of what services it offers.
Credit unions vary but offer a variety of services such as savings account, personal loans and pay-check advances (not to be confused wit h 'payday loans'). Originally you would have had to be an existing member to get help but this is no longer the case with many of the initiatives.
Any profit made by the union is ploughed back into improving its security and services, making it a great alternative to the capitalism of high street banks.
Credit Union Loans
If you've been refused money by other lenders, you'll do well to look into acquiring a loan from a credit union. They have the ability and desire to lend to more 'at risk' groups of people, and are still able to offer interest rates as low as around 12%. This is far cheaper than credit cards and payday loans, and sits around the level of what you'd expect to pay from a building society or bank. Just to give you an idea of how good a deal this is- if you were to borrow £1000 for a year, at the end of the twelve months, you will only have paid a total of £1,066!
The top lending level for loans from credit unions seems to peak at around £3000. Not a staggering amount, but a lifesaver for many in current difficulty and an ideal affordable alternative to payday loans.
As already mentioned, credit unions also offer savings accounts, which are not only more ethical than high street banks, but also offer very competitive rates. Even if you don't need help now, it's not a bad idea to open a savings account with your local union, depositing a small amount each month, which will guarantee you access to their services in the future. You'll also be helping the local community who rely on the credit union, as each account will help it to grow and invest more in community welfare.
If you're just a bit short until your next payday, some unions offer payday loans, although this might be restricted depending on your employer. For example, some unions have agreements in place for local council and health workers in that area only.Image: © Vitaly Titov & Maria Sidelnikova | Dreamstime.com