Bank on alternatives
SAVERS and borrowers who feel they are getting a bad deal from their high street bank or building society may not realise they have another option, called a credit union.
Credit unions, also known as community lenders, are local financial co-operatives owned and controlled by their members, that aim to help ordinary people save and borrow small sums at reasonable rates.
They first appeared in the 1960s but have their roots in the friendly society movement, which grew in the late 18th century.today there are around 250 across England, Scotland and Wales, with around 1.4 million members.
They manage more than £2billion of members’ savings, which may sound a lot but makes them minnows compared to the banks.
Yet small can be beautiful and their size is a part of their appeal.as the big banks close branches and force customers to transact online, credit unions remain embedded in local communities.
Some offer more competitive savings rates than the big banks, who have been reluctant to pass on the last year’s base rate hikes to customers, said Tobias Gruber, chief executive of credit broker Mycommunityfinance.co.uk.the finance industry has taken advantage of people for too long, worsening the cost-of-living
crisis. He said: “Credit unions are growing in popularity because they put people first, not profits.”
As not-for-profit organisations, credit unions can provide more competitive savings rates, while charging borrowers less, Gruber said.
How much you can borrow varies according to the credit union but it can be as high as £25,000, depending on your personal circumstances.
Credit unions can shield vulnerable borrowers from doorstop lenders and loan sharks.
“They offer relatively low-interest rates, particularly for those who struggle to access traditional credit,” said Gruber.
By offering more flexible lending criteria than the banks they can offer much-needed support Gruber said.they are not charities and you do not have to be in financial distress to use their services: “Credit unions use the money they make to provide better rates for savers and borrowers, or to improve their services and increase the number of people they can support.”
For depositors, Gruber said credit unions are as safe as banks because they are regulated by the Financial Conduct Authority and the Prudential Regulation Authority. “Savings are protected up to £85,000 through the Financial Services Compensation Scheme, in the same way as any other bank,” he added.
Credit unions require their members to have a “common bond”, which can cover a range of criteria, such as living or working in the same area or industry, or belonging to the same church, trade union or other association.
They are a bigger deal overseas, with more than 87,000 credit unions in over 118 countries, serving almost 400 million members. In the US, they make up around a third of all lending.
Financial inclusion body Fair4all Finance said many credit unions offer Christmas savings schemes, allowing people to save as little as £1 a week.
Pioneer Credit Union chief executive Elaine Gilmour, said: “They have been a trusted source of help for decades but too few people know about them.”
You can find the right credit union for you by visiting Findyourcreditunion.co. uk, and searching on your postcode, employer or any groups or associations you belong to.
To find out more, visit the Association of British Credit Unions website at abcul.coop.