Advantages of credit union?

Options
13»

Comments

  • System
    System Posts: 178,094 Community Admin
    Photogenic Name Dropper First Post
    Options
    A payday loan is also worse than a subprime lender - if the rates are similar between credit unions and subprime cards what is the real difference?

    Can't credit unions also have products to compete in the less adverse credit markets as well? - my rating is undeveloped but not adverse, I don't get everything but I get the odd 0% card
  • Anthorn
    Anthorn Posts: 4,362 Forumite
    First Post First Anniversary Combo Breaker
    Options
    MatthewAinsworth wrote: »
    A payday loan is also worse than a subprime lender - if the rates are similar between credit unions and subprime cards what is the real difference?

    Can't credit unions also have products to compete in the less adverse credit markets as well? - my rating is undeveloped but not adverse, I don't get everything but I get the odd 0% card

    Depends on what you mean:

    For example, the Credit Union I support works with local Housing Associations which in turn support the Credit Union sometimes financially. It can work by the tenant directly paying their benefits into the credit union, the credit union then splitting it into a number of "pots" including rent and other outgoings with the balance credited to a prepaid card to spend (see my avatar) as well as loans when the need arises. This facilitates money management and finance which the CU member may not otherwise have and goes a long way towards guaranteeing payment of rent and therefore guaranteeing a home.

    It would be good if everyone could get a 0% card but that's not always available to everyone.
  • System
    System Posts: 178,094 Community Admin
    Photogenic Name Dropper First Post
    Options
    Pots are certainly a good thing where discipline needed, is this something banks won't do? I could imagine having 1 savings account and isa with each bank, but maybe they won't create more pots than that

    Catering for that market is good, but it'd be good to have even more competition for the higher end products, I hope CU customers do look to 0% cards once their credit rating is sufficient, and not only see those loan rates

    I was dubious about one offer I saw where you could have a 5% loan secured against an equal amount of savings - I think why not just use your own savings?- there is near zero risk to the CU in lending you your own money
  • Anthorn
    Anthorn Posts: 4,362 Forumite
    First Post First Anniversary Combo Breaker
    edited 25 June 2017 at 11:17PM
    Options
    MatthewAinsworth wrote: »
    Pots are certainly a good thing where discipline needed, is this something banks won't do? I could imagine having 1 savings account and isa with each bank, but maybe they won't create more pots than that

    Catering for that market is good, but it'd be good to have even more competition for the higher end products, I hope CU customers do look to 0% cards once their credit rating is sufficient, and not only see those loan rates

    I was dubious about one offer I saw where you could have a 5% loan secured against an equal amount of savings - I think why not just use your own savings?- there is near zero risk to the CU in lending you your own money

    What you describe in your last paragraph is more a loan club than a Credit Union. In a loan club, members must save and borrow and usually they borrow the same amount that they have already saved and pay interest on the loan. At the end of the year the balance is shared out amongst members according to their share(s). I haven't seen a loan club for a long time.

    Whether a Credit Union requires savings to support borrowings depends on who you are and your credit history. Bear in mind that most credit unions use CRAs and report to them. The most common method of simultaneous saving and borrowing I see is Child Benefit paid directly to the Credit Union which partly repays a loan and partly contributes to a Christmas Club.

    It's a thorny subject on MSE to both save and borrow at the same time. As you say, why not just spend the savings. The main point here is when the loan is repaid you've still got your savings - c.f. Christmas Club savings.
  • slenderkitten
    slenderkitten Posts: 1,051 Forumite
    Name Dropper First Anniversary Combo Breaker First Post
    Options
    Hi im looking to borrow £500 but have no idea which avenue to try. Would this credit union be of any use to me?
    My Signature is MY OWN!!
  • Zanderman
    Zanderman Posts: 4,683 Forumite
    First Anniversary Name Dropper Photogenic First Post
    Options
    slenderkitten wrote: »
    Hi im looking to borrow £500 but have no idea which avenue to try. Would this credit union be of any use to me?

    There are lots of credit unions, and everyone's circumstances for loans are different, so your question is impossible to answer, except to say 'maybe'.

    Have a look at https://www.findyourcreditunion.co.uk/ to see which credit unions are available to you and what they can offer.
  • Anthorn
    Anthorn Posts: 4,362 Forumite
    First Post First Anniversary Combo Breaker
    Options
    slenderkitten wrote: »
    Hi im looking to borrow £500 but have no idea which avenue to try. Would this credit union be of any use to me?

    Look at the APRs offered by those "avenues": As a new member of a C.U. you can expect to pay a high APR and you can also expect to possibly have to save as well as borrow simultaneously and you can expect to be credit checked and ID checked. But depends on the C.U. of which there are many.

    I'd say that if the only option open to you is a pay-day lender or a doorstep lender then give your local C.U. a go.

    Association Of British Credit Unions Ltd
    http://www.abcul.org/home
  • TheGardener
    TheGardener Posts: 3,303 Forumite
    Name Dropper First Anniversary First Post
    Options
    A lot of CU's only lend to their regular savers. The idea is that you save - then if you need a small loan, you can borrow. They are not sources of general loans to the public as such.
  • Anthorn
    Anthorn Posts: 4,362 Forumite
    First Post First Anniversary Combo Breaker
    Options
    TheGardener wrote: »
    A lot of CU's only lend to their regular savers. The idea is that you save - then if you need a small loan, you can borrow. They are not sources of general loans to the public as such.

    So who exactly are the Credit Unions in "a lot".

    If we are talking about a local Credit Union which is general and open to everyone in their locality then so are loans open to everyone in that locality. The idea is not that "save - then if you need a small loan, you can borrow" at all. In fact some Credit Unions loan higher amounts such as car loans in the thousands of pounds. The loan I got upon sign-up from my local Credit Union primarily intended to improve my credit history was £500 and that amount is pretty much a standard starting point.

    If we are talking about a Credit union which is specialised to an occupation, trade or employer for example then their loans are not open to everyone.

    As I have already posted it all depends on who you are, whether you have a job, pension, benefits or other income and your credit history. Credit unions are not really any different than other lenders except they are more accessible for those who are not really what we may regard as good prospects. The loan officer will usually calculate what you can afford to pay back and offer a loan based on that.
This discussion has been closed.
★ ★ ★ Meet your Ambassadors

Categories

  • All Categories
  • 343.2K Banking & Borrowing
  • 250.1K Reduce Debt & Boost Income
  • 449.7K Spending & Discounts
  • 235.3K Work, Benefits & Business
  • 608K Mortgages, Homes & Bills
  • 173.1K Life & Family
  • 247.9K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards