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Borrowing through a credit union

borrowing through a credit union
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When you’re looking for credit, the most obvious places to apply are the bank and payday loan lenders. However, did you know borrowing through a credit union could be a better option?

Credit unions often offer lower rates than other lenders and there are no third parties taking a cut of the profits. They have often proven to be a lifeline for those really struggling with their finances.

What are credit unions?

At one time, credit unions were made up of small non-profit groups. They were set up by people who had things in common who wanted to benefit the community. These days they tend to be slightly bigger and the members place their savings within the pool to create a total borrowing amount.

In order to be part of a union members have to either live or work in the same area, belong to the same trade union or church or work in the same place.

 

How credit union loans work

One thing you’ll notice about credit union loans is that they tend to be cheaper than other loan types. They typically charge quite a low interest rate which makes them attractive to borrowers.

It isn’t uncommon to find credit unions which charge just 1% interest over the course of a year. There is actually a law which states credit unions can’t charge more than 2% interest on the loans they provide.

The amount you can borrow will vary between unions. Some offer small lump sums of money, while larger credit unions will offer a higher limit. Some even offer mortgages. The term of the loans also varies. Unsecured loans can be taken from five to 10 years. Secured loans on the other hand can be borrowed for up to 25 years.

It is worth noting that you can’t just typically sign up with a credit union and borrow money straight away. They expect you to have some savings in the union first. There are some who don’t require this so you will need to shop around if you need the money urgently.

A credit union loan also comes with built in life insurance. This doesn’t cost any extra and it provides insurance in case you die while you have a loan.

Finding a credit union

You can only be a member of two credit unions at the same time. Initially members needed to sign up to local unions where they work and/or live. However, the law was updated on January 8th 2012 which enabled credit unions to be more flexible.

There are still rules which need to be followed on who can join, but the credit unions have the power to update the rules if they want to.

You can easily find a credit union near you online. It is always worth comparing a few different unions before deciding which one you want to be a part of. The earlier you join, the more likely you will be able to get the loan you need when you need it. Of course, you can also search for credit unions that offer immediate loans if you are desperate for help.

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About Jemma Porter

About Jemma Porter

Jemma Porter is an experienced content creator who has written for a number of online publications. A self-confessed penny pincher; she's often found seeking out the best personal finance deals.

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