A Brief Guide about Credit Union Loans

However, in order to be eligible for membership, your circumstances need to match that of the ‘common bond’ that each union has. This may require that all its members live and/or work in the local area, work for a specific employer (for instance, the police or NHS) or are part of the same association, such as a trade union or church. This bond varies between credit unions though, so it’s worth finding out which ones are local to you and then checking out what their bonds are and whether you’re eligible to join — you can start your search through the Association Of British Credit Unions website.

Although most only offer their loans services to people who already save with them, times have changed and now select unions also allow new members to take advantage of their loans. The main benefit of a credit union loan is that they specialise in small amounts — anything between £50 and £3,000 — that are normally only matched by small payday-style lenders. While the interest rates can certainly be higher than some high street loans or credit cards, the maximum amount chargeable (which is 26.8% APR, although most hover around 12.7% APR) is still significantly lower than payday loans, which can range up to a massive 2,000%! They also carry no hidden charges or penalties, and come with built-in life insurance meaning that if you die before paying off the entire loan, the union would be insured for the remaining amount without your family becoming responsible for it.

The length of the loan can vary depending on which union you’re eligible to join, although as a rule you could get an unsecured loan for up to 5 years (ranging up to 10 in some cases) and a secured loan up to 10 (increasing to 25 with some unions). You will have to become a member of the union first though and then abide by whatever rules they have in places — such as undergoing checks to ensure you can afford to repay the loan or saving regularly with them for a set period — before you can consider taking out a loan with them.

In Summary

Credit Union Loans…

* Are an often-overlooked source of credit for people in need of financial help
* Will only be given to people who are already members of the specific credit union
* Sometimes also require you to be saving with the credit union
* Can be ideal for people looking to borrow smaller sums of money
* Are definitely cheaper than short-term payday loans!
* Can only have a maximum interest rate of 26.8% APR
* Have repayment terms ranging between 5 and 25 years depending on the union