Affordable credit

Credit unions come in all shapes and sizes. Whether you’re looking for a credit union with online and phone banking, a payroll partnership with your employer, a local branch or service point you can walk into – or a combination of all three – there’s a good chance you’ll find the credit union you’re looking for to meet your needs.

Credit unions offer three main types of financial product: current accounts, savings accounts and loans.

Current accounts

Credit union current accounts can prove a lifeline if you have difficulty opening an account with a bank or building society.

They do not offer overdraft facilities. However, they do generally offer:

• A debit card
• A cheque book
• Cash machine withdrawals
• Budgeting advice

Some accounts also allow you to set up direct debits and standing orders.

Just be aware you may have to pay a monthly administration fee of up to £10.

Savings accounts

Credit union savings accounts are similar to a ‘normal’ savings account with a bank.

A credit union may well also offer other types of savings accounts, such as children’s savings accounts, notice accounts and cash ISAs.

Some credit unions offer savings accounts with a fixed rate of interest, but most offer an annual pay-out or ‘dividend’ The total dividend you receive varies depending on how much profit your credit union has made in the last year. If they don’t make any profit, you probably won’t receive a dividend.

You have the flexibility to save how much you like, when you like.

Some credit unions include built-in life insurance.

Loans

To get a loan from a credit union, you might need to have been a member for a certain period of time,or have already built up some savings in a credit union account.

There’s a cap on the amount of interest that credit unions can charge on their loans of 3% a month or 42.6% a year APR

There are no hidden charges with credit union loans and no penalties if you repay the loan early. Life insurance is built-in so that if you die, the loan is fully repaid.

As with any lender, you’ll be expected to repay your loan as agreed

Most credit unions can lend for up to a maximum ten years on an unsecured loan and up to 35 years on a secured loan (where they’ll lend against something like your property or car). Not all credit unions will offer longer term loans

You can pay back your loan in several different ways, although some credit unions might not offer all methods. You can do this:

• by making payments face-to-face
• by Direct Debit from your bank account
• through you wages at work — if your employer has links to the credit union, you can pay back your loan by having money taken straight out of your wages
• through Paypoint — some credit unions issue Paypoint cards which you can use to pay back your loan at your local shops
• direct payments from your benefits – some credit unions take benefit payments such as Child Benefit directly and deduct your monthly loan repayment from your entitlement.