Credit unions are a way to save and borrow money without using a bank, building society or other lender. There are pros and cons to choosing credit unions, and whether it is the right choice for you will depend on your situation.
You may go to a credit union if you are only able to get credit from other places where you have to pay a lot more to borrow.
What is the difference between a credit union and a bank?
At regular banks, shareholders tend to decide how they are run. Shareholders are people who have stocks in a company, which means they make more money when the company is doing well.
But a credit union is a cooperative financial institution. This means that members involved in the credit union decide how it is run. Making a profit is less important to them.
Credit unions have three main aims:
- To provide loans at low interest rates
- To encourage all members to save regularly
- To help members in need of financial support
Credit unions can offer:
- Accounts to people with a poor credit rating
- The freedom to save money in a flexible way
- Alternative borrowing options to payday loans
- Support to people on a low income, or people who have never borrowed before
You must be a member of a credit union to get a loan from them. Some will ask you to build savings first.