Credit Unions are great, particularly in a recession. They work well for savers and borrowers.
- 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 Â£400 washing machine loan, paid roughly over a year. The Credit Union would charge Â£28, and a doorstep lender would charge over Â£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 - 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!