Credit Union: Waste of time!

SnowTiger

Anthorn wrote: »

Credit Unions cannot possibly be more geared more to lending than to saving because it's from saving that their money comes from to lend. However it's loans that they devote most of their information to since there is often not a lot to be said about saving but several types of loans need to be explained.

That's what I mean. Pop off to most Credit Union websites and there's lots of information for borrowers. Details about interest rates, forms to download to apply for a loan, etc. At least one even has a Wonga style slide thing.

Information for savers is usually very thin on the ground.

Often the only way to find out what rate of return savers can expect to receive is to delve in to the minutes of previous AGMs. And, of course, that's rarely guaranteed in the future.

It's difficult to think of a reason to save with a Credit Union, unless you intend to borrow in the future. Hence, Credit Unions tend to be geared more to lending than saving.

And, doesn't at least some of their lending come from the interest they receive from loans?

Raindow Saver, which was mentioned here, charges up to a whopping 43.2% APR internet on their loans. However the interest they pay to savers isn't very generous. From their Savings FAQ:

Do you pay interest on Savings?

No we do not pay interest. However, the regulations allow us to pay dividends to adult members if we make a profit.

All savings accounts held are eligible for a dividend. The dividend payable is agreed and declared at the AGM each year. We will not always make a profit so a dividend is not guaranteed.

[Deleted User]

I always see stuff advertised for my local credit union locally. It doesn't state that you have to be on benefits to get a loan either, so never knew that they only give loans to people on benefits but not to employed people. Good job I never bothered joining for the savings aspect of it.

Anthorn

antrobus wrote: »

Nevertheless, they do go bust on a regular basis.

Five went bust in 2014, eight in 2013. None so far this year, which might turn out to be a good year.

http://www.fscs.org.uk/industry/sub-schemes/accepting-deposits/deposit-defaults/

After the government's curious support of challenger banks and the disastrous support for Co-operative Bank attention has now been turned to Credit Unions or more accurately the expansion of Credit Unions. This has been accompanied by more support from Local Authorities and banks, principally Lloyds and Barclays. Lloyds in particular provides grants to facilitate mergers. What we should see as a result is more mergers and less failures.


Probably the biggest problem is in getting Credit Unions managed by those who are qualified to manage. The regulator still has to approve such appointments but whether something has been learned from the experience of Co-operative Bank and the appointment of Rev. Flowers remains to be seen.


Lastly, there is a problem with the Credit Unions' banker: In the past it was reasonable for Credit Unions being co-operatives to bank with Co-op Bank which although never a co-operative was owned by a co-operative - Co-operative Group. But now that Co-operative Bank is no longer wholly owned by a Co-operative that's something of a contradiction for the Credit Unions which are touted as alternative to banks. Probably moving to Nationwide would be less of a contradiction.

[Deleted User]

Say I saved in a credit union and built up £250 of savings over a year or so. Then my washing machine breaks down and so I go to the credit union to ask for a £200 loan to get a new one. They will refuse because I have the savings and so will tell me to use the savings instead?

Anthorn

Deleted_User wrote: »

So basically if you got no money you can't get a loan from them and if you have money you can't either as you have money. Does indeed sound like a pointless scheme.

A corrupted appraisal: Credit Unions encourage thrift and saving and that's the base on which a credit union is built. Without saving there would be no money to loan. They provide loans to people who need them and can afford to repay the loan. Security is provided in the form of savings and wages or a state benefit such as Child Benefit.


Basically, someone who doesn't have savings in the union and a bank standing order or wages or a benefit to pay in cannot get a loan. But it gets easier as a relationship develops. Credit Unions should always have an income and expenditure statement to make sure the member can afford the loan and are usually accomodating when calculating repayments.


But yes, you can't really get a loan unless you can prove you don't really need it and that's the way of credit unions: Basically you get a loan and repay it while at the same time keeping your savings intact. That's important because the level of savings are related to the free life insurance but that's another story.

[Deleted User]

Anthorn wrote: »

A corrupted appraisal: Credit Unions encourage thrift and saving and that's the base on which a credit union is built. Without saving there would be no money to loan. They provide loans to people who need them and can afford to repay the loan. Security is provided in the form of savings and wages or a state benefit such as Child Benefit.


Basically, someone who doesn't have savings in the union and a bank standing order or wages or a benefit to pay in cannot get a loan. But it gets easier as a relationship develops. Credit Unions should always have an income and expenditure statement to make sure the member can afford the loan and are usually accomodating when calculating repayments.


But yes, you can't really get a loan unless you can prove you don't really need it and that's the way of credit unions: Basically you get a loan and repay it while at the same time keeping your savings intact. That's important because the level of savings are related to the free life insurance but that's another story.

Thats what I'm saying. I am employed but not entitled to tax credits or child benefits, so they won't lend to me as I don't have what they think as "secure income". Even if I saved a couple of hundred with them first.

So if my washer breaks down and I ask for a £200 loan to replace it, but they refuse and tell me to use my savings instead then I would be back to square one. What if my freezer then breaks down the week after.

And just because I'm not entitled to benefits, it doesn't mean I am well off. It just means the welfare system only caters to those with kids or those who can't/won't work.

RuthnJasper

I've been with my CU for over 3 years, but never been successful in securing a loan from them despite demonstrating my ability to pay. That said, they have been helpful on the 'phone, but I get the impression that they are "struggling" as it took two months and several emails before they returned my call recently.

It's a pity, as they would be a fantastic alternative to PDLs, but perhaps the reason they are folding is because loans are not repaid... They only work if both parties stick firmly to the agreements.

antrobus

SnowTiger wrote: »

...It's difficult to think of a reason to save with a Credit Union, unless you intend to borrow in the future. Hence, Credit Unions tend to be geared more to lending than saving.
...

The problem that CUs have, is that there is no point in a credit institution raising deposits unless they have a profitable outlet for lending the funds raised. As a whole credit unions have plenty of cash; what they have is a shortage of lending. Hence they tend to promote loans rather than deposits.

Pingu2

Deleted_User wrote: »

Thats what I'm saying. I am employed but not entitled to tax credits or child benefits, so they won't lend to me as I don't have what they think as "secure income". Even if I saved a couple of hundred with them first.

So if my washer breaks down and I ask for a £200 loan to replace it, but they refuse and tell me to use my savings instead then I would be back to square one. What if my freezer then breaks down the week after.

And just because I'm not entitled to benefits, it doesn't mean I am well off. It just means the welfare system only caters to those with kids or those who can't/won't work.

I saved 2k with CU last year and in March applied for a 15k loan over 5 years which I got within 24hrs of applying. I am in work and earn a good salary - we do get not any tax credits/benefits. The loan will be paid in full in October as we have an endowment maturing and which will pay what is left of the mortgage and this loan. I planned it this way with saving some money on a regular basis and the early repayment will not incur any fees. We wanted the money sooner to complete a large house alteration so this way suited us.

Dont know where you get the ideas CUs only cater for people with children or who are on benefits

Anthorn

Deleted_User wrote: »

Thats what I'm saying. I am employed but not entitled to tax credits or child benefits, so they won't lend to me as I don't have what they think as "secure income". Even if I saved a couple of hundred with them first.

So if my washer breaks down and I ask for a £200 loan to replace it, but they refuse and tell me to use my savings instead then I would be back to square one. What if my freezer then breaks down the week after.

And just because I'm not entitled to benefits, it doesn't mean I am well off. It just means the welfare system only caters to those with kids or those who can't/won't work.

In your situation you would have your wages or salary or a regular standing order paid directly into the CU to back up the loan repayments. When you apply for a loan the loan officer should ask for an income and expenditure declaration and they should then decide on whether you can repay the loan and what the repayments should be. If they judge that you cannot afford a loan you won't get one. They are not going to leave anyone destitute.

As I posted, the key to getting a loan is to (1) have a regular deposit into the CU and (2) have savings in the CU.

Look for example at a hyperthetical situation: A young single-parent mother on benefit needs a washer and takes out a loan to buy it. She has her Child Benefit paid into the CU part of which is used to pay the loan repayments and the rest saved for Christmas for the kid's presents.
http://www.rainbowsaver.co.uk - look at Child Benefit Savings and Loan Plan under Loans.
http://www.eslcu.co.uk/