Credit Union Loans in the UK
Credit Unions have been operating in the UK longer then people imagine. They were primarily referred to as mutual societies before eventually becoming known as Credit Unions.
The fundamental basis of a Credit Union is that its members own the union and share in its success. UK Credit Unions offer its members opportunities to save and to arrange low cost loans. Unions encourage its members to save on a regular basis and offers education in money management.
Many people nowadays are tempted to take out loans offered by doorstep lenders. These loans have traditionally high interest rates which often plunge a household into a spiraling debt crisis.
The main purpose of a good Credit Union is to offer people a viable alternative to high interest charging organisations. They aim to educate people in money matters and encourage participation and promote regular saving.
Members often pay an initial fee and then are encouraged to save on a regular basis. The amount saved is often small but members are reminded that these regular payments mount up and if they remain untouched they may help in a time of need.
Credit Unions can also provide loans to their members. These loans are at lower interest rates and are more affordable. A loan is applied for as with any loan but a good Union will allow a little more leeway in its approval policy. The applicant is usually invited to a discussion about the purpose of the loan and a loan officer may go over the figures provided on an application form.
Once the loan is agreed a repayment plan will be discussed. Many credit Unions will encourage the loanee to pay back more in their agreed weekly or monthly repayment, this extra is diverted to their savings account meaning that in many cases they have savings after the loan is repaid. Interest is charged on a daily basis allowing the loan to be repaid early without incurring any penalty fees.
Once a member has demonstrated an ability to keep up with repayments they can often apply for subsequent loans at greatly reduced rates. This incentive can make a big difference in many peoples’ attitudes to credit and saving. Of course like many bank style organisations they have extra products like free loan insurance policies but each Union may offer slightly different incentives.
Many Credit Unions aim to play a major role in a community and can offer banking services perhaps not available to some members of society. They have a good working relationship with big organisations such as the Citizens Advice Bureau and The Department of Work And Pensions who see the role of Unions as a positive thing.
Many Credit Unions operate in the UK and all offer unique extras. Some have holiday or Christmas club whilst others offer online savings and prepaid credit cards or automated salary deductions. Many visit local primary schools and help to organise saving clubs for children with the aim of teaching children the value of savings and treating money matters seriously.