Credit Unions have been around in one form or other for over two centuries, being formed out of the friendly society movement of the 18th century through to mutual societies. These are types of co-operatives where groups with common links can benefit from being able to save, and also to borrow money. Credit unions are owned and controlled by their members, not outsiders, so they will usually have a greater knowledge and understanding of what their members want. Credit unions have a long history for being there for the community.
Why Join a Credit Union?
Although credit unions do suffer bad debts they generally cope much better than other forms of lending institutions such as banks and building societies. Basically, you never know when you might find bing a part of a credit union of benefit to you.
Credit Unions Need Lower Profits
The beauty of credit unions is that as “not-for-profit” organisations, they don’t have to make huge profits for shareholders, just sufficient to meet certain legal requirements.
If you are seeking to borrow money, and don’t want or can’t afford to pay the going rates offered by traditional lending companies, then why not look in to joining a credit union? Do you have a “common bond” with others which means you can apply to join a credit union? Maybe you live or work in the same area, or for the same company. Perhaps you worship in the same locality, or are a member of the same trade union.
Savings with Credit Unions
And don’t just think of the angle of borrowing money. Credit unions offer savings accounts which of course offer interest on your savings. These rates might not be all that high, but by being a member who is willing to put in, you stand a better chance of being accepted should you ever need to ask for a loan.
Loans
Compare the interest many credit unions charge for loans. Often they are at 1% per month on the reducing balance, though they can go up to a maximum of 2% per month. You can use the calculator provided by the Association Of British Credit Unions Ltd. If, for example, you borrowed £2,000 over 12 months, paying 13 payments of £164.83 the interest repaid on that loan would work out at £142.79, total paid back £2,142.79.
Supposing you went to a high street bank for the same loan, at 19.9% APR Typical. Over 12 months the monthly payments work out at £183.63, total paid £2203.60, so the interest is £203.60. That’s £60.81 more than the same loan through the credit union.
Free Life Insurance
Other advantages with credit unions is that life insurance is usually included without extra charges on both savings and loans. So, if a member dies, the amount of their savings at the time could be as much as doubled and someone chosen by the member would receive those monies.
And credit unions aren’t just there for short term loans. Some, not all, can lend up to 10 years for unsecured loans, and for secured loans up to 25 years.
In these days where credit can be hard to get, or is provided at very high interest rates, credit unions can make a lot of sense, and provide members with the means to borrow money.
Credit Unions-More Benefits
If you can be a part of a credit union then you should do so. Get into the savings habit, knowing that you are helping your own particular community out. You never know, one day it could be you benefiting from a low-cost loan.
By using this type of arrangement it can mean fewer online transactions, less interest payable on credit cards with outstanding balances, and if you can do without a card altogether, less likelihood of becoming a victim of credit card fraud.
CUNA, Credit Union National Association in the United States gives some excellent information about everything to do with credit unions.
