Credit unions
Joining a credit union can offer financial benefits including low-interest loans, debt consolidation and savings
Simple savings, sensible loans
Credit unions are member-owned financial cooperatives which only provide banking services to their members. They are not-for-profit organisations, focused on providing financial services at fair and reasonable rates. Members of a credit union must share a common bond, such as living in the same area or working for the same employer or organisation.
UNISON has established a network of credit unions covering the UK where members and their families can both save and take out low-interest loans, in many cases through payroll deductions.
Benefit for UNISON members
Credit unions typically have lower operating costs than other financial organisations and any profit earned can be used for the benefit of members and not external shareholders.
This means loan interest rates are often lower than those offered by banks, and particularly doorstep or payday loan companies.
UNISON’s There for You credit union service offers members access to low-interest loans and a range of savings products through our UK network of partner credit unions. Whether you’re dissatisfied with current banking arrangements, are struggling with exorbitant interest rates charged by payday and other lenders, or simply looking for an ethical alternative, credit unions may provide just the solution.
UNISON has established a network of credit unions covering the UK where members and their families can both save and take out low-interest loans – in many cases, through payroll deductions.
We already know just how many members are using payday loans and other high-interest loan products – often getting caught in a trap of spiralling debt. UNISON is promoting credit unions as financial and ethical co-operatives that will serve members in a safe and responsible way and promote financial wellbeing.
Saving with a credit union
As little as £1 may be all you need to open a savings account. This could be a sensible option if you can only afford to save a small amount each week or every now and then. And your reward for saving will be that you receive a dividend each year – often in the region of 2-3% of the amount you have saved.
Borrowing from a credit union
Our credit union partners can offer loan products – including emergency loans – to members who do not necessarily meet the criteria to borrow from high street lenders such as banks and building societies. Loans come with no hidden charges and no penalties for early repayment.
What services does a credit union provide?
This depends on the type and size of the individual credit unions, but generally includes:
- Savings accounts – credit union members are encouraged to build up their assets and accumulate savings. From any amount, no matter how small and whether for the short or long term, a range of accounts – for instance, Christmas savers, funeral savings plan, budgeting – may be on offer.
- Affordable loans – which always take account of individual, personal circumstances and affordability. Interest rates compare well with banks and building societies and, more importantly, there are no arrangement fees or repayment penalties. Free life cover is also provided.
- Payroll deduction for both savings and loan schemes.
- Current accounts.
Is a credit union right for me?
Joining a credit union could be for you if you are interested in being part of a democratically led organisation that:
- is for people and not for profit;
- serves its members first and foremost;
- appeals to anyone wanting to support their local community and economy;
- is committed to helping its members improve their financial situation;
- offers fairly priced loans, including to people with imperfect, limited or no credit history;
- offers a broader range of savings and loan products than many other lenders;
- understands the differing banking needs that reflect a wide range of income groups;
- is appropriately regulated by the Financial Conduct Authority and authorised by the Prudential Regulation Authority – so is a safe place to save.
How do I join a credit union?
Some credit unions are based on where you live or work and others, such as police credit unions, on the job you do.
Go to our directory and find the one that best suits you. Then contact us or, if you prefer, click on the link to go their website. If you are contacting a credit union directly, please say you are a UNISON member and quote reference T4Y.
Make an enquiry about credit unions using our online form
Frequently asked questions
Credit unions have clear objectives enshrined in their constitution.
These rules are:
1. Promoting thrift – members must be encouraged to save as well as borrow.
2. Providing credit and loan products with fair and reasonable interest rates.
3. The efficient use and control of members’ savings for mutual benefit to earn a rate of return (the dividend).
4. Training members to use money wisely, devise a budget and manage their financial affairs.
5. Members own and control their credit unions.
6. Because credit unions are co-operatives, members have a say in how the credit union is run and the directors are elected from the members, by the members.
7. Credit unions serve the community, so when you invest in your local credit union, you know it’s your neighbours or colleagues who are benefiting – not outside shareholders.
You will need to be a member. Many are free to join, although some may apply a nominal charge, which is usually no more than £5.
The amount you can borrow will vary from credit union to credit union. Some will require you to be in a savings scheme for anything up to 12 weeks before being eligible for a loan, while others will offer an instant loan – again, this will be subject to circumstances. As responsible lenders, credit unions generally encourage saving alongside any borrowing.
Once you have completed a loan application form, this will be assessed by your credit union for affordability. While there is a form of credit scoring, this in itself is not necessarily the sole deciding factor.
Unlike mainstream banks, credit unions are more flexible and will look at individual circumstances, affordability and whether there is a payroll-deduction scheme in place with your employer.
Generally, loan applications are decided very quickly.
This will depend on the type and size of individual credit unions. Some credit unions allow you to hold a current account, pay bills, transfer money to other accounts online or send money abroad. Most credit unions also offer budgeting accounts that can help in managing personal finances. Contact your local or employer-linked credit union for full details.
UNISON only works with credit unions that are authorised and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. So, in the unlikely event that a credit union fails, the Financial Compensation Scheme will pay any financial loss up to £85,000. They also provide a mechanism for resolving any disputes (should they arise) between UNSION members and their chosen credit union.
Contact the credit union in the first instance to discuss options. The quicker you do this, the more options the credit union will have to consider.
If you are already in debt and worried about finances, contact UNISON Debtline in the first instance, for free and impartial advice about your options. Call 0800 389 3302 (24 hours, 7 days a week).
If recent events are making life financially difficult, you could also make a request for financial help through UNISON There for You. Contact 020 7121 5620 or email [email protected]
Whether you can spare an hour a week or even more – there are many ways to get involved. Credit unions are primarily run by the members for the members, and becoming a volunteer means you can:
1. Use and develop your skills.
2. Access training.
3. Give something back to your community.
4. Be part of the management committee.
Contact your local credit union to find out about relevant volunteering opportunities.
No. UNISON recommends that branches bank with Unity Trust.