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A credit union is an organisation that is owned and controlled by its members. This is known as a financial cooperative. A credit union is established with the vision of providing its members with an excellent level of customer service, being community-focused and to provide financial services at competitive rates. You will find that although credit unions provide the same services as a bank or mainstream lenders their terminology is different.
Ultimately a credit union is an organisation and it will strive to make good commercial decisions, be a profitable company with an array of financial products, whilst looking after its member’s concerns. An attraction of a credit union is that their interest rates are usually very competitive for borrowing and also for any savings that you may have with them. The costs (fees / charges) can also be lower than other banks and building societies. A credit union uses the money that a member invests (deposits) to provide loans to other members.
A credit union will usually welcome new members which means that you are a part-owner of the credit union. There will be certain membership requirements, such as a geographical requirement, that a new member must fulfil to become a member and you should research this before making an application to join. Once an application has been approved, a member has the right to vote of the companies affairs and will receive financial dividends if & when the credit union makes a profit.
Like selecting any organisation that you would like to obtain services from, each will have their very own set of business standards or products that you may want to engage with and these requirements will differ for each individual. Credit unions are reputed to have excellent customer service plus for members who wish to deposit money into savings accounts, they will be able to obtain good rates of interest and for those wishing to borrow money will be able to apply for loan products with a low-interest rate.
A credit union loan is exactly the same as any other loan product that you can apply for. The credit union or lender must be authorised to lend money to the borrower and we suggest that you check that the credit union is on the FCA register before you apply. It is prudent to consider credit unions as an option to borrow money but it is important to note they are not the only lending route available. You should consider using banks, building societies and other means of lending too.
Yes, it is safe to borrow from a credit union. Credit unions are regulated financial institutions and have a duty to their members that they act in an appropriate way to look after their member’s interests. A credit union is bound by the strict legalities, rules and governance of the UK and these rule and guidelines are enforced by the Financial Conduct Authority. You should always double-check the information you are given and make sure that the credit union is registered with the FCA. You should also check that a credit union is protected by The Financial Services Compensation Scheme (FSCS) which provides protection up to a value of £85,000 per person.
If you have decided that you would like to borrow from a credit union then you can usually apply online. An online application will only take a few minutes to undertake which will ask you personal questions about your loan needs and your personal circumstances. Before you apply you should make sure you meet any specific member requirements, like a geographical requirement for instance.
No. In line with any financial institution lending money to an individual, they will require a borrower to meet certain qualifying criteria, including checking that the loan is affordable. A lender has a regulated responsibility to ensure that the loan is provided with due care and attention.
As a lender must act responsibly to provide credit to an individual, there will be circumstances that mean that the lender will have to refuse to lend to the applicant. This could be due to the borrower not having enough disposable income or a bad credit rating. If you do have bad credit you could consider using a price comparison table and apply to a lender you like.
Credit unions are a safe alternative to other UK lenders. They must be authorised to lend with the FCA and will provide many financial products to its members, usually at a competitive rate of interest. Credit unions are known for their excellent customer service to their members. Credit unions are not the only option available to any person needing to borrow money and other routes should also be considered to ensure that the borrower is getting the best deal available.