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Banking and borrowing

Credit unions. What are they and how do they work?

Credit unions are becoming a popular alternative to high street banks and expensive payday loans. But what are they and how do they work?

The main difference is that a credit union is a cooperative financial institution.

This means that the people who use the credit union decide how it is run. Rather than 'shareholders' deciding. Shareholders are people who have shares in a lender. Their shares earn them money when the business does well.

There are lots of reasons why people pick credit unions over banks but the main ones are:


  • A poor credit rating or difficulty opening a high street bank account
  • Supporting a local cooperative that does not profit shareholders
  • Having the flexibility to save what they can, when they want to
  • They provide an alternative to payday loans
  • Credit unions may be more willing to help:
    • People on a low income
    • People without a previous borrowing record

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 advice and help

You must be a member of a credit union to get a loan from them. Some will ask you to build savings first.

Find a credit union near you and get in touch to find out if they can help you.

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How do credit unions work?

Credit unions are cooperatives. They work differently to a high street bank.


  • They are run by members for members
  • Lots of smaller credit unions rely on volunteers
    • Only the larger ones have paid staff
  • Most credit unions use members' money to run their services
  • Credit unions reward members not outside shareholders

How do I join a credit union?

You need to have a ‘common bond’ to open an account with a credit union.

Every member will be linked in some way, for example:


  • Living or working in the same area
  • Working for the same employer
  • Belonging to the same trade union
  • Belonging to the same church or other association

Most local areas have a credit union.

Anyone in the house of a person with a 'common bond' with a credit union can usually join.

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