Credit Unions: Official MoneySavingExpert.com Discussion

beanielou

Bosie wrote: »

My local credit union is down in Sussex and for a loan up to £1000 they charge 42.6% Apr. I think that's a lot, also if you are 65 years of age, you have to be a member for 3 years to apply for a loan.

Blimey, that is high.

choccyface2006

27col wrote: »

Why don't you just ask them. They're the ones who know.

Each credit union will have different rules but at ours there are no early repayment penalties, you can overpay regularly or in extra chunks so you will always pay less interest than stated on the credit agreement.

Bosie

beanielou wrote: »

Blimey, that is high.

I think that as well, never compared other credit unions on apr.....

beanielou

BLIMEY, Just looked at my credit union & it varies from 26% to 42.6%.
That is dire.
Cheaper than doorstep lenders but wow.

hign10pines

Bosie wrote: »

My local credit union is down in Sussex and for a loan up to £1000 they charge 42.6% Apr. I think that's a lot, also if you are 65 years of age, you have to be a member for 3 years to apply for a loan.

Ah I know that one I have a loan with them unfortunately

SparklesJD

Every CU has different rates and, although traditionally CUs cater to those with less than perfect credit, there are many CUs that pride themselves on how competitive they are on all loan sizes - the lowest I've seen is 2.9% on £7,500.

The T&Cs for borrowing also vary, so for example, you can apply for a loan from my CU at the same time as you join and the rate you'd get if you were approved would be the same rate as it would if you'd been a member for a while.

You also need to look at the total cost of credit. With no set-up fees and interest charged on the reducing balance, repayments are designed to be affordable.

Which? says "Many credit union loans, for example, will cost 1% a month on the reducing balance of a loan (an APR of 12.7%). This means that if you borrowed £1,000 repaid over one year, you would repay £1,067 in total." https://www.which.co.uk/money/credit-cards-and-loans/loans/guides/borrowing-from-a-credit-union

You'll usually find that credit unions are most competitive on smaller loans, so up to £5000. My CU charge 18.2% for £4,900, compared to Barclays who's advertised representative rate is 22.9% APR.

This is because the cost of making the loan is the same, regardless of the loan size and high street banks aren't really interested in lending smaller amounts, so their best rates are for £7,500 and over, whereas our average loan size is £2,300 and that's fairly high for the sector.

Many CUs charge more for loans up to £1000 because they must take into account how much it costs to make the loan vs how much we get back in interest over the repayment term - you may not realise it, but (excepting those CUs offering services on behalf of councils and housing associations) interest on loans is their only source of income - plus, there tends to be a higher default rate on smaller loans, which also needs to be taken into account.

Regardless of the reasons behind it, you will find it very difficult to get a loan under £1000 for less than even the most expensive CU rate (3% monthly or 42.7% APR). All the bank rates I looked at online started at £1000.

Your options would be a high-cost lender, an overdraft or credit card according to this article: https://www.uswitch.com/loans/small-loans-what-are-your-options/

Zanderman

Have heard today that RetailCURe, the relatively young credit union for retail workers, is merging with the older, more established Voyager Alliance Credit Union. There's a Special General Meeting to discuss it in Manchester on 27th June (so not much notice!).

It's not clear why RetailCURe are taking this step - or what the implications are for their original concept which was a dedicated product for retail workers. I assume they are either having some problems or simply think being part of something bigger is better. If the former I would hope they'd come clean!

The circular says existing savers will have the same t&c (they did have some excellent fixed rate - 2% and 3% - offers when they started up, one of which I took advantage of).

Summary details below:

The retailCURe brand will continue. The staff team will remain in place. All contact details are unchanged. All your savings will remain protected under the Financial Services Compensation Scheme. If you have a savings account with us your rate will remain the same during the term of your deposit. All borrowers will have the same terms and conditions.

As a co-operative the merger must be agreed by the members we are therefore calling a Special General Meeting for 27th June when we would like you to vote in favour of the merger. A follow up meeting with a second confirmatory vote will take place on 24th July.

behelpful

See their website yourcu-dot-co-dot-uk

biosonik

YourCU is the 9th Credit Union to go bust this year. It's a sad thing to see a community organisation go under.

Credit Unions are great concepts but their execution of their main ethos leaves a lot to be desired these days. Most CUs push loans as much as possible to make profit in order to provide dividends to savers to compete with banks. You also have joining fees and yearly charges to deal with.

Many of the smallers CUs don't report loan repayments to your credit file as they lack the know how or capabilities and tech within the industry is abismal due to a lack of investment. So you'll likely receive a poor digital experience and your credit rating will be no better off from borrowing with them.

If you need less than £1,000 and your credit rating is trash then a CU is a good choice otherwise, there are better options.

DCFC79

biosonik wrote: »

YourCU is the 9th Credit Union to go bust this year. It's a sad thing to see a community organisation go under.

Credit Unions are great concepts but their execution of their main ethos leaves a lot to be desired these days. Most CUs push loans as much as possible to make profit in order to provide dividends to savers to compete with banks. You also have joining fees and yearly charges to deal with.

Many of the smallers CUs don't report loan repayments to your credit file as they lack the know how or capabilities and tech within the industry is abismal due to a lack of investment. So you'll likely receive a poor digital experience and your credit rating will be no better off from borrowing with them.

If you need less than £1,000 and your credit rating is trash then a CU is a good choice otherwise, there are better options.

Luckily lenders dont see the credit ratings so cant lend based on that.