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  • FIRST POST
    • MatthewAinsworth
    • By MatthewAinsworth 16th Jun 17, 5:36 PM
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    MatthewAinsworth
    Advantages of credit union?
    • #1
    • 16th Jun 17, 5:36 PM
    Advantages of credit union? 16th Jun 17 at 5:36 PM
    A guy at work who I respect showed me his credit union cash card, and said how you could access cash from it, I was a little dubious because it didn't sound much better than a debit card on a basic bank. I look up my local ones (won't say which) and they offer no interest, but have a prize draw, and I've read that some charge for an account, am I missing something? I could understand less fines perhaps for people who perpetually fail transactions or go overdrawn, so I assume this is like the complete opposite of a high street bank's reward account?

    I look at the loan rates, one is 26%, the other is 40%, and you call the bank's money-grabbing, I'd be better off with credit cards - although maybe it's after the poor credit market, but it doesn't look like an organisation that "gives better rates because it's mutual". My colleague said how it's good that the interest was fixed, I suppose that's a bonus if you might take longer than contracted. If they are not for profit and charge that interest rate I assume that interest is to cover defaults and wages.

    And isn't mutuality a building society thing? They have the same selling point?
    I suppose their existence is a good thing because it offers extra competition and credit to those who might go payday, but advantages for the ordinary person? - I have poor credit (undeveloped) but I still managed to get a card and overdraft facility
Page 2
    • Anthorn
    • By Anthorn 19th Jun 17, 9:54 PM
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    Anthorn
    Doesn't it boil down to not paying bills on time? So it's either forgetfulness (direct debit), lack of will, or not keeping employment - and basic work is easy to find if you're willing to work in an agency in a town, and benefits cover the bases where people can't work - if some people can survive on that income why can't everybody?
    Originally posted by MatthewAinsworth
    You appear to be rather starry-eyed about sub-prime lenders and in addition you display a lack of knowledge about Credit Unions and their function.

    Sub-prime lenders are in the biz to make money, to make a profit and the sub-prime biz is safer than it at first appears: For example, how many people who have obtained a sub-prime card to repair their credit will default?

    I suppose the main advantage of Credit Unions is they help to avoid doorstep lenders and payday loans. Consider the probable APR for a new member at a Credit Union of 40% - 50% and compare it for example with Provident where the representative APR proudly displayed on the bottom of their website is 535%.
    https://www.providentpersonalcredit.com

    The reasons why different people need financial help are many and varied. Personally, if I was in need of help I would prefer a Credit Union loan to a doorstep lender, payday loan or loan shark!
    • MatthewAinsworth
    • By MatthewAinsworth 21st Jun 17, 4:00 PM
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    MatthewAinsworth
    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
    • By Anthorn 22nd Jun 17, 12:37 PM
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    Anthorn
    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
    Originally posted by MatthewAinsworth
    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.
    • MatthewAinsworth
    • By MatthewAinsworth 22nd Jun 17, 1:50 PM
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    MatthewAinsworth
    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
    • By Anthorn 25th Jun 17, 11:13 PM
    • 3,101 Posts
    • 798 Thanks
    Anthorn
    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
    Originally posted by MatthewAinsworth
    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.
    Last edited by Anthorn; 25-06-2017 at 11:17 PM. Reason: last paragraph added
    • slenderkitten
    • By slenderkitten 2nd Jul 17, 11:56 AM
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    slenderkitten
    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
    • By Zanderman 2nd Jul 17, 7:28 PM
    • 1,231 Posts
    • 3,621 Thanks
    Zanderman
    Hi im looking to borrow £500 but have no idea which avenue to try. Would this credit union be of any use to me?
    Originally posted by slenderkitten
    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
    • By Anthorn 3rd Jul 17, 9:35 AM
    • 3,101 Posts
    • 798 Thanks
    Anthorn
    Hi im looking to borrow £500 but have no idea which avenue to try. Would this credit union be of any use to me?
    Originally posted by slenderkitten
    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
    • By TheGardener 3rd Jul 17, 11:26 AM
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    TheGardener
    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
    • By Anthorn 3rd Jul 17, 3:30 PM
    • 3,101 Posts
    • 798 Thanks
    Anthorn
    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.
    Originally posted by TheGardener
    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.
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