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 or 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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