There are some people that may have never heard of a credit union, but it is well worth finding out a lot more about them and thinking about how they could benefit you.
A credit union is basically a local bank. It is usually only open to members who live within a certain area, although this may change depending on who runs it. It could be that it is for members of a specific trade union or in a certain career, they all differ. They are non-profit making organisations who will provide savings accounts and lend money. They tend to be aimed at those people who struggle to get high street borrowing. There are 450 in the UK, so there is a chance that there will be one local to you that you may be able to use.
The aim of them is to provide a community finance solution for those that would otherwise have to turn to unscrupulous lenders or just not be able to get extra money at all. Most offer loans and savings accounts and some may offer current accounts or mortgages too. Their rates are not often that competitive though but it can be worth comparing them just to check.
A credit union can be a really good place to apply for loan. They will often lend as little as £50 to up to £3,000 and many banks will not lend that small an amount. This means that you do not have to borrow more than you need, which should make repayments easier and it could make the loan cheaper too. It used to be that you had to have savings in the credit union in order to apply for a loan. This is not always the case anymore, although having savings will show that you can manage your money.
Savings accounts tend to be different to banks. They will not necessarily pay an interest rate, but a dividend rate which is determined by how well the credit union does during the course of the year. However, some of the larger ones will now offer fixed savings rates. It is worth finding out how they work before you start to save with them so that you understand what sort of return you are likley to get.
The credit union offers the same protection as normal savings accounts so if they go bust then you can claim back up to £85,000 from the Financial Services Compensation Scheme in the same way that you would if that happened to your bank. This means that you can save with them and know that you money will be a safe and secure as it would be in a bank.
If you want to borrow money and you do not have a good credit record, then a credit union could be well worth a visit. They do not just look at the credit record but they speak to you face to face and assess each case on its own merits. They will try to find a solution so that you can get the money that you need and make sure that they get the repayments that they need. Even if you are on benefits or do not have a regular income they will look at your case and decide whether they think you are too high a risk or not. If you have savings with them, they are more likely to lend to you as they can see that you are capable of paying in some money regularly. If you do have savings though, it would be cheaper to use those rather than getting a loan, but of course you may not have enough.
So it is worth finding out whether you have a local credit union and then seeing whether you would qualify to become a member of it. If you think that you might want to use them in the future then it could be good to set up a savings account and pay money in regularly. Even if you are only paying in a very small amount of money, it will still show that you are capable of making regular payments and therefore could be responsible enough to make loan repayments.