Why to save or borrow through credit unions

A credit union may be the right solution for those who want to either save or borrow money

08:18 09 October 2013

Credit unions are an alternative to the financial solutions available on the small lending market segment. This may be the right solution in some cases, but may prove to be unprofitable or simply not efficient for others. Here is why and how to save or borrow through credit unions:

• a credit union is a financial cooperative, which means that it is owned by all of the people that contribute to it;

 

• you can become a member of the credit union if you currently work in the area where the union is created, or if you are a member of the group that created it, such as various unions, associations or religious groups;

 

• There are many methods that you can use to save through a credit union. One of the easiest is to set a payment directly from your wage;

 

• loans through credit unions are generally limited to £1,000, although some larger unions may offer more;

 

• loans are also limited to at most 2% monthly interest rate, which means that if you take a loan through a credit union worth £1,000, you will end up paying an interest of £20;

There already are some 400 credit union across the UK, and the Government expects the general membership to increase significantly. Credit unions are successfully used in other European countries in order to challenge the regular payday lenders.

You can check online to see what credit unions are available near you, but you will have to talk to the representatives to see if you are eligible to join it. Keep in mind that all contributors are encouraged to save rather than borrow, and also that this is only a small lending solution.