Credit union loans

Credit unions offer a range of financial services to their members, including loans and bank accounts. They exist to benefit communities rather than make a profit.

Members of a credit union share a common bond e.g. they might:

• live or work in the same area
• be employed by the same company
• belong to the same church or organisation

Credit unions are regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

To get a loan, you usually need to:

• have been a member for a certain time
• have a savings account with the credit union (this isn’t always the case)

Credit unions tend to look at your overall financial situation, not just your credit score. This means you might be able to get a loan even if you’ve been turned down by a bank or building society.

Some credit unions can get the money to you on the same day.

Credit unions offer a range of loans, from £500 right up to £70,000 is some cases.

The interest rate on your loan will depend on:

• how much you want to borrow
• the length of time it takes you to repay the money
• the credit union you borrow from

Credit unions have a maximum interest rate they can charge you a year.

Depending on where you live, this is capped at:

• 42.6% in England, Scotland and Wales (3% per month)
• 12.68% in Northern Ireland (1% per month)

There shouldn’t be any hidden fees with a credit union loan, and you can repay early without penalties.

Use the Association of British Credit Unions’ online loan calculator to get an idea of how much your monthly repayments will be for different loan amounts.

If you think a credit union loan is for you, follow these steps:

• Search: see if there’s a credit union you can join at findyourcreditunion.co.uk.
• Join: apply online, by phone or in person. There might be a wait while they process your application.
• Save: some credit unions may ask you to start saving before applying for a loan.

Setting up a direct debit is an easy way to make sure you don’t miss any repayments.

You can also pay in person at a credit union branch or Paypoint shop.

Or the money can be deducted directly from your wages before you’re paid.

The credit union might cancel your membership or take you to court if you don’t repay your loan.

If you’re struggling to repay your loan, the first thing you should do is talk to your credit union.

They may be able to help by:

• lowering or pausing payments
• stopping interest for a while
• creating a more affordable repayment plan

They should also give you time to get free debt advice.