Credit Unions: Official MoneySavingExpert.com Discussion

I want to thank Martin for putting the article together and helping us to have this opportunity to discuss credit unions. I have been a member of a number of different credit unions for the last 7 years, as well as being involved in the running of them, so I'm delighted to see them getting some welcome exposure.

In response to the member who posted above querying the wisdom of using credit unions at times like this, I would say that your concern is understandable but, I believe, misplaced.

Unlike the vast majority of lenders around today, credit unions lend on the basis of a person's ability to repay a loan, not just their credit history. There are countless people out there who struggle to obtain credit because of a mistake they have made managing their money in the past, (or even because banks wont have them as customers due to lack of ID). This doesnt mean they are a credit risk now, (just as a squeaky clean credit history doesnt mean there is no risk in the future). There will of course be some people who simply cant afford a loan and a credit union would turn them down just as anyone else would, (although we are more likely to help them with debt advice than other organisations).

The Credit Union I am currently a member of, (Camden Plus in North West London), considers loan applications from any member without any savings period up front. First loans may well be charged at higher interest rates, but as you 'prove yourself' to the Credit Union your subsequent loans are cheaper.

Plus, as has been mentioned elsewhere, credit unions can claim to be the genuinely 'ethical' choice for savers, as the money deposited by savers stays within the local community, rather than 'leaking out' through high interest payments on loans with doorstep lending companies and loan sharks. And because of their increasing success in lending wisely, credit unions are often paying better dividends these days, (3% to 5% is not uncommon).

One final thing - there is a very interesting article in this week's Newsweek magazine about how the 'sub-prime' lending model can be very effective for organisations like credit unions. Note that it isnt credit unions that have had to go cap in hand to governments for bail outs recently!

After reading the article I'm considerign joining the Credit Union through the salary deduction available through my employer.

The credit union which I can join offer current accounts and I'm seriously considering closing my current account with a high street bank to open one with the credit union as I dislike dealing with banks so much :eek:

I do a few hours a week at our local city credit union. A few points that I would like to mention. The way we operate is very transparent. We don`t try to force loans on people and if a loan is required we are very clear about how it works. Most loans are likely to be around £250. A detailed soa is often required. All loan repayments need to be affordable.

We also encourage saving. Remember that people using the CU are often not on high incomes. One thing that springs to mind is that either myself or co workers get to know our customers. We are far more friendly than your city centre bank lol.

I like the fact that we are responsible lenders and I accept, lenders of last resort for many that don`t get into the clutches of the door step lenders. Shame the mainstream banks didn`t adhere to some responsible form of lending.

I would like to point out that ABCUL aren't the only body that recognises and supports Credit Unions. ACE (Access to Credit Unions for Everyone) also offers information on other CU's not listed on the ABCUL website.

Their website is: http://www.acecus.org/.

I am not linked to them, but my local CU comes under them not ABCUL.

hiya, I'm usually a reader of the site rather than commenting, haven't posted for a long time!
I am a credit union volunteer - have helped 5 as I move round the UK I get involved in my local credit union, and give talks about them. The points I make have been the same for over 10 years, but at last people really get the point:
1. banks play with your money on the international money markets, credit unions keep the funds in the local economy and it helps people get fair loans
2. your money is as safe as it would be in a bank account due to the Financial Services Compensation Scheme
3. Safe place to save with no lower limits - Farepak demonstrated the importance of that, and the fact that the Post office and others ask for a minimum opening deposit or a high standing order or make you pay your wages in are all factors that stop people getting a bank account, credit unions welcome any size deposit, and you can take it out for Xmas or any other time.
4. Ethical and local, a friendlier service that can be flexible, my credit union allows loans to be paid off early with no penalty, a temporary change in payments if finances change etc
5. If you are paying in a small amount every month, you are not forgoing much interest by opting for a credit union account - and many credit unions pay a good divi. Next year we might see a change in the law to allow interest to be paid.
6. A small amount of Life insurance is included at no charge, no exclusions for terminal illness or long term health problems, (only exclusion is HIV and Suicide) a lot of members with long term disabilities cannot get any life insurance elsewhere
7. People on low incomes are not necessarily the riskiest borrowers, middle class people with large credit cards who borrow too much are the riskiest. My credit union lends the amount someone needs, banks can't be bothered with small loans, so come to the credit union if you need a small loan. Our average loan amount is about £500, our smallest loan less than £100, our largest £2,000 this year, although we have loaned bigger amounts.