What is a Credit Union?
A Credit Union is a not-for-profit community savings and loans co-operative run by the community for the community, where people put their money/savings in so they can be lent to others. There are approximately 450 Credit Unions across the UK.
What is a co-operative?
A co-operative is basically an organisation that is jointly managed and owned by a group of people who run their services for the sole benefit of their members.
What are the criteria required to join a Credit Union?
To join a Credit Union you are required to share a “common bond” with the existing members, such as working for the same employer or living in the same local area, or belonging to the same church, trade union or other association. So long as one family member shares the “common bond” and joins the Credit Union, then all other family members are permitted to join too. Each Credit Union has its own definition of a “common bond”, so do contact them and discuss your options.
What does not-for-profit mean?
Not-for-profit means the members use their own money to run their services and reward its members not to pay external shareholders. They have to set aside enough money every year to make sure they don’t go bust. It’s usual occurrence to use any outstanding monies to improve services to members, and usually share it equally between the members in the form of a “dividend”, which can be anything up to 8% a year. Credit Unions aren’t permitted to lend all of their money out at once and must put it into bank deposit accounts to ensure they can get the money back if they need to.
What services does a Credit Union offer?
All Credit Unions offer savings and loans accounts. Most also offer life and loan protection insurance. Some also offer other types of insurance products including travel, motor insurance and contents insurance. Again, you would have to call them and confirm this. Some of the larger ones also offer extra services such as debt management, mortgages, Child Trust Funds, funeral plans, current accounts, ISA’s and more.
How do I put money into a Credit Union Account?
You can do this in several ways, either at a local collection point, direct from your wages via payroll deductions, by standing order or direct Debit. Welfare payments can be paid directly into your CU account.
How do I withdraw funds?
Smaller Credit Unions require for you to use a pass book to withdraw your funds whilst larger ones can provide you with a Debit Card to use at a cash machine. You can also visit a local collection point or arrange for payments to be made directly to a bank account (this is known as “Bacs”).
How can I borrow money from a Credit Union?
The lending guidelines vary with each Credit Union, so you would need to enquire about this. Firstly though, they have to make sure you’re able to afford to repay anything you borrow. They usually lend small amounts for any purpose and most CU’s can lend over a period of 5 years for an unsecured loan and 10 years for a secured loan. How much a CU can lend you depends upon the amount its members have saved and how good they are paying loans and interest back on time.
When you borrow from a CU you will usually get free life insurance to cover the value of the loan so that if you die before repaying the loan in full, then the insurance repays it.
What happens if I don’t make the repayments?
If you don’t make the repayments, a CU can enlist the help of debt-collection agencies. They can also contact the DWP if you are on Welfare and request it be taken from your monies prior to you receiving them. If you are employed, they can get the monies back through the County Court.
What is the typical APR on borrowing?
The maximum is APR 26.8% which means that if you borrow £100 over a year, the most you will pay back is £126.
How do I find my local Credit Union?
The best way to do this is to use ABCUL’s “Find your Credit Union” website:
Or you can telephone ABCUL on 0800 015 3060.
You can also try your Yellow Pages or ask at your local Citizens Advice bureau for contact details.