Credit Unions: Official MoneySavingExpert.com Discussion

The credit unions are a curate's egg of the financial system. Martin was honest enough to admit they can pay very low 'interest rates' [dividends] as well as a theoretical 8%. My own (in the Isle of Wight) paid 0% in 2006/07 for instance, was paying 2% and 3% in previous years and last year we really hit the jackpot with 4% [won't be paying that next time!] but of course that's just a 2%+2% payment in reality.

At the same time, the government found it necessary (in boom-time conditions for credit) to increase the existing cap on loan rates. It had been 1% per month since the hated Thatcher's time - all through those inflationary periods. Yet in Bustless-Britain - in 2005 Gordon Brown quietly signed of a doubling of the cap to 2% per month. After that, the credit union literature stopped comparing itself favourably to credit card rates and the (favourable) comparator became 'door-to-door lenders'. Fair enough - but that does mark a transition in the CU 'movement' from more staid and financially stable groups (like city council workers with some job protection) to more precarious and ill-defined ones (like area bonded associations with attracting memebership from unwaged groups with nowhere much else to go)

And there have been many CUs that have failed even before the middle of last year - perhaps as a consequence of this Brownian-inspired 'deregulation' if I can put it like that.

CUs are definately 'mutual' and not in competition with each other. There is no published table of which pay the best dividend rates - because outside of the bond or area it is irrelevent - the 'general' public can't become members.

What would interest me in this dicussion is if MoneySavingExpert could set up a credit union itself [a 'cyber' credit union?] What are the legalities and the practicalities of such an enterprise? Who would the borrowers be and who the lenders, and how would the 'democratic' part operate? Why doesn't Martin Lewis spend a bit of time now researching the concept - and the potential pitfalls? For example membership is limited to 5000 I believe - which might necessitate the creation of legal sub-enties out of the orginal with separate governance and accountability after a short time. In practice it sounds as though CUs having simply been made too difficult to set up - and that - combined with general deteriorating conditions - would lead to a net reduction in the numbers currently in existence.

Therefore let's also make a request for this discussion to include remarks about how CU mergers come about.

[I'm just a 'sleeper', here, as you can probably imagine]

Hi can anyone tell me aboutcredit unions we have a very poor credit rating and have read a little about these but not to sure how they work. can anyone shed any light?

Hi there
Like the previous post has stated some credit unions are different. My local one you have to save a minimum of 8 weeks before a loan is considered, but loans for more than £2000 evidence of income is required.
Regards

Credit Unions are great, particularly in a recession. They work well for savers and borrowers.

Put simply:-

- Where can those people on low incomes or with poor previous credit get a competative loan rate?

- Where else can you put your money that is 100% secure, that doesn't pay fatcat wages, doesn't get invested in unethical companies and actually helps other people?

Whilst the credit union does perform credit checks and checks that the person can prove a 'capacity to repay' - the worse case interest % of 26% is miniscule to those advertised elsewhere. Doorstep lenders charge between 182-400% and in the recent Ascent of Money programme on C4, a scottish loan shark was charging 25% a week - 11 million % APR!!!

A good example is a £400 washing machine loan, paid roughly over a year. The Credit Union would charge £28, and a doorstep lender would charge over £270.

A standard bank account with instant access (as per a credit union) only pays very low interest on balances, so the cost of putting your savings into a credit union is low. I would urge everyone with savings to put some into there local credit union where they can help other members of the community to achieve financial inclusion at very little personal cost (if any). Without savers (even regular small amounts that build up for a special purchase), a credit union cannot operate - and this service will dissapear from your community.

They are fully backed by the Financial Compensation Scheme, Financial Ombdusman Service and are regulated by the Financial Services Authority - doorstep lenders aren't!

My local CU is absolutely fantastic - https://www.lincscreditunion.org.uk - for anyone in the county of Lincolnshire.

Sorry for the long post (rant) but this is something I am passionate about!

I have benefited from loans from credit unions at times when I was desperate . A few hundred to pay a repair bill or for a special occassion means being able to sleep at night. The regulations that Credit Unions have to abide by are re-assuring for the savings you are investing. I would recommend that people find out more - you can't just walk up and get a loan - normally you have to prove that you are capable of re-paying by showing you can save on a regular basis . It does not have to be a large payment but it does have to be regular and it can be via standing order, direct debit as well as over the counter. Everybody should know about them ! :hello: