“ What are they? How do they work? What are your experiences? „
Credit Union are a great way of saving, they have no share holders so no big fat cats wanting to make profits from the company, so all profits made go right back into the members pockets! Many offer a large range of financial services such as savings, loans, current accounts, mortgages, insurance etc. Depending on where you live their may be a few different credit unions available to you. I live in Glasgow and have 2 really big ones as well as my small local one available. They really are the sensible way to save, meaning you have the option there also to access their low interest loan rates! It's really good for the small emergency loans, the big banks won't even look at you if you want under £1000, leaving you to go to door step lenders and the such. I use mine (Scotwest) to pay off my insurance for my car in the one lump and pay it back weekly, it's so much easier! I would reccomend everyone to look into joining their credit union!
I have been a member of my local Credit Union since it started, about 10 years ago. In fact, I am proud to say that I am Member number 31! Although Credit Unions all have points in common, there are also differences so I will start with a general look at Credit Unions, before looking at my own experience.
~What is it?~
A Credit Union is basically a financial cooperative, owned and controlled by its members. They offer affordable loans and encourage members to save. They are run by a volunteer board of directors democratically elected by members. Anyone can join, as long as they are part of the 'common bond'. This could be people living in a shared area, working for the same employer or belonging to the same association. This is a very important concept in the Credit Union system, and I will come back to it. Important too is the 'not for profit' ethos, particularly when we hear of banks announcing record profits all the time, but still happy to raise charges for customers and to pay their workers badly. Therefore Credit Unions do not discriminate on the grounds of earnings or residence when awarding loans. They are also happy to welcome savers, no matter how much (or how little) they save.
The principles and ideals that underpin the credit Union concept follow the industrial revolution and the cooperative movement closely. The movement started in Canada and the States where it became an influence for the rest of the world. In Ireland, a Credit Union was founded in 1958 by a schoolteacher and her colleagues and it was to be the first of many there. It took much longer for the movement to start in England, Scotland and Wales. I'll talk about Scotland here because I know more about that, but I would guess the history is much the same in the rest of the UK. In Scotland, then it all started in 1970, under the impetus of an unemployed painter and decorator, Bert Mullen, who founded the Western Credit Union in the deprived area of Drumchapel. After that, nothing much happened until the 1980s where an upsurge took place, to get to today's membership of 125,000 in over 120 Credit Unions. The worldwide membership is 118 millions, in 40,258 Credit Unions, in 79 countries. Some countries like the USA and Australia count 30% of the population as members, whilst in Ireland, this figure reaches a staggering 50%.
In these times of easy credit and cheap (relatively) interest rates, where we are encouraged to borrow and 'flex that plastic' all the time, Credit Unions go against the grain a little, as they actually encourage people to save. This is made easy by setting up local collection points and allowing members to pay directly from their wages. This I believe is a great way to save, particularly if money is tight, as you never actually get the money and are therefore less likely to miss it. The dividend paid to members varies, according to the size of the Credit Union, and the amount of reserve they have. My Credit Union is not actually big enough to pay dividends, but some of the bigger ones give their members as much as 8% on their savings, a handsome return I'm sure you'll agree. For those of you for whom investing ethically is important, it is worth noting that all the money you save up will be used locally to provide loans for the other members who are neighbours or colleagues.
When you are on a low income, it is very difficult to get credit. And yet, most of us could not manage certain purchases outright, even if we get a decent wage. There have been reports of entire streets unable to get credit, due to the credit history of a few of its inhabitants. This of course makes loan sharks very happy. They will lend to anyone, but the cost of borrowing from them is usually exorbitant. Some people, who have no choice but to borrow money in this way, find themselves in appalling situations. Very recently in the news, there was a story of such a loan shark, who was charging 150 to 200% interest for loans and tried to force his 'clients' to pay back using threats of violence, sexual intimidation and physical assault, even on pregnant women. This is where the Credit Union offers a real alternative. By law, the maximum a Credit Union can charge is 12.7%. This is charged on an ever reducing balance, which means that every week or month, you will pay less and less interest. Many Credit Union's rate is even lower. There are no hidden charges and you do not get penalised for repaying the loan early. As an experiment, I used the loan calculator provided on the ABCUL website to calculate the cost of a £1000 loan over 2 years and compared it with the Royal Bank of Scotland (my own bank, and one which made record profits last year).
Royal Bank of Scotland
Total Monthly repayment: £54.56
Monthly Insurance Loan Repayment: £6.28
Total Loan Insurance: £130
Total Payable including Loan Insurance: £1,309.44
Free Insurance with the loan (member's benefit)
Total Monthly Repayments: £47.07
Total Repayment: £ 1,129.76
The total amount you can borrow is based on ability to repay the loan (now, that is sensible but it seems banks have forgotten this rule). In my Credit Union, you can borrow up to two and a half times the value of your shares (savings). Members are encouraged to continue saving whilst repaying their loan, which means their savings will have grown by the time they have finished repaying their loan.
Credit Unions are run by volunteers. Ideally these should have excellent people skills, a basic knowledge of accounts and some knowledge of Credit Unions, but full training is given to all the volunteers. People who volunteer to work in their Credit Union will be helping their local community and acquiring many relevant, transferable skills. A volunteer's job in a Credit Union can often be a first step towards entering or re-entering the job market, as it builds confidence as well as skills.
To its members, a Credit Union offers motivation for saving and affordable loans. It also offers free life insurance as your relatives get double the value of your share in the event of your death and any loan is paid off. It is a very ethical (sometimes profitable, sometimes not) way of saving which benefits your local community. Credit Unions can tailor their services to suit an individual's circumstances.
To the wider community, a Credit Union improves the general financial knowledge of its member and offers training to its volunteers. It invests local money locally and helps restore a sense of pride in disadvantaged and disaffected communities. It provides means of targeting financial exclusion, identified by the government as one of the principal aspects of a cycle of deprivation. Bigger Credit Unions also employ paid staff.
When I look at my saving books (I'm on my second one), I feel like I am looking back at a little bit of my history, retracing fortunes and misfortunes and changing circumstances. Although my situation has changed enormously in the last few years and is no longer precarious, I still take out the odd loan. It is cheaper than borrowing from a bank. And I try and save a little, as much to build a modest egg-nest as to be involved in the Credit Union. After all, their motto is "people helping people".
Leaflets from my local Credit Union
A lot of people dont realise what credit unions are, do you ? I am in two credit unions, one was from my time in the police and the other is the local credit union were i live. i have been a member of each for about 5 years. I live in a private house, mine yeahhhh! at last...sorry but we lived in a concrete flat with noisy neighbours. I needed initally to start to save for the deposit on my house. now im not on a lot of money, i have a retirement pension which produces a small income. We wanted to buy our own house, to be honest if you saw where we lived so would you. I knew that if i put money in the bank i would dip into it so i needed it locked away but easy access in case i needed it for a house. The area that i live in is a credit union area, volunteers make up staff and its basically run like a bank. you save what you want each week whether it be 50p or £200. they sign your book. It sometimes takes a day or two to get your money out, but this was brilliant for me as when i wanted the money, i got it elsewhere and it stayed in the credit union. In my local credit union, you have to save for 10 weeks out of 13 weeks and then you can apply for a loan. the first loan is always two above what you have got saved up. You go for an interview, which we normally spend laughing and joking, sign the forms and then thats all you can do. This then goes in front of a committee, they say yeah or nay! they dont say nay often. The committee is secrete so that theres no recriminations on any one. You learn your decision that night, in ours if you dont get a phone call youve got it.... you pick up the cheque on monday, if its under 500 pounds you can cash it at the local post office, if its over 500 you go to the co-op bank in town and cash it. Or you can put it in your bank. Credit Unions are very handy for people who are on low incomes and cant get loans off the bank or for people on benefits who dont have a bank account. It he
lps all sorts of people. You get a good return on your investment. Last year our credit union did really well and we all got 4% interest on our savings which was brilliant. They are also governed by the government so if someone decidely ran off with all the money then your insured. Also all the loans are covered by insurance as well so if you disabled or made redundant it covers this. Why pick a credit union, well first of all these came into place to take out the loan sharks who would take peoples bits and pieces or benefit books off them and charge them astronomical rates. Also it stops people like sorry to mention the names like provident who if you borrow £500 over a year charge you £300 for the pleasure... The credit union would charge you approximately £40 to cover its cost and insurance. the aprs on credit unions cannot usually be beaten by the banks or the rates they pay you on savings unless your really quite rich and have loads of money in the bank which to be honest not many of us do. the other benefits of it depending on which credit union you are in is, if say for instance i die today, then my loan is paid off and the money that i have in savings go to whom i decide. Also some credit unions also double the money you have saved. A friend of mine recently passed away and his family never liked him and never kept in contact with him. He was a nice old gentleman and he told me how much he had in the credit union one day. After he had passed away his family became very interested in his savings. when they got there they found he had left all his money to the dogs home where his dog would have been kennelled at for his life. Needless to say his family werent impressed, but i could just imagine him smiling as he thought the world of his dog as it was his only companion. Now i said im in two credit unions, one is work based and you dont have to save your money in that one whilst repaying back but this is no
t the norm. Disadvantages, ok so it might take me a day or two to get my money and you are compelled to save and pay but its great because for the first time in my life i am saving a little money for a rainy day. I would recommend them to anyone who is working or not working, put 50p a week away it soon grows and you can have it coming out of your banks as well into your account there. I have been saving for the last year and a half with them and I have managed to put away 2.500 pounds. I am saving up for new windows for my house and this money is not missed as it is just written off out of the household budget each week. Of course it is rather a lot of money and I cannot wait until my loan is paid off, by the I am hoping to have the 4,000 that I need to do my windows and it would not have caused us any real hardship in saving it. thanks for reading karen :0)
For me the Strathclyde Credit union has been a godsend. I will admit it I'm a terrible saver any money I earn goes in one hand and straight to the nearest shop. I have tried savings accounts many times but as soon as I deposit the money I am back to withdraw it a few days later after seeing a much needed purchase. One of my collegues told me about the credit union and I decided to join as she made it so tempting and easy. I work for what was then Strathclyde Council in the education department but it got split up into regions but at the time it allowed me to join the largest credit union in Glasgow. How you join: Joining is very simple as long as you are a council employee you just fill in a simple form with your address and payroll number and how much you want to be deducted and how often. After this the credit union will deduct the stated amount right off your wages, perfect for me as you don't see them the are taken off before it reaches your bank account. Benifits of joining a credit union: The obvious benifits of joining a credit union are savings and low cost loans. After you have been a member for ten weeks or more you can apply for a loan up to five times your share balance ( this is the money you have saved in your account)for example if you have saved £10 per week for ten weeks you have £100 so therfore you can apply for a loan up to £500 and interest is very low at 1% on your balance. It is a simple form to fill in and the girls are usually on hand for any qwuestions you may have. You can still save whilst paying back your loan for example if you deposit £10 per week £7 of this can go to loan repayments and £3 can go towards your shares. Billiant your shares can still go up at the same time as paying back your loan. You even get interest on your savings called a dividend and is paid twice a year at a rate of 5% on your share balance. If you aren't a council em
ployee you can still join if a member of your family has joined and all you have to do is fill in a direct debit form for payments to the credit union. Even if you don't know anyone who works for the council there are plenty of local credit unions and most housing schemes in Glasgow run one. I'm not allowed to jion my local credit union as you can only be a member of one and the one I am in is the largest so in my opinion the best. It is worth checking out if there is one in your area as it is the easiest and cheapest way to obtain a loan.
I have been a member of my local credit union, Walsave, since it began 3 years ago as both a saver and a borrower. I joined via my then employer, Walsall MBC, who were sponsoring the setting up of the Credit Union. The authority initially paid the salary of the Credit Union manager together with providing the office space free of charge. The whole thing has grown rapidly and now pays its own manager plus two further staff. It has also encompassed other areas to increase the number of members – South Staffs Water Works and Neighbourhood Committees for example. You can borrow up to four times the amount of your savings and set a monthly repayment to repay the loan within 2 years. You can repay as fast as you wish but two years is the maximum length of any loan. You must also continue to save as you repay the loan but this need only be the minimum £10 per month. The savings are used as collateral for the loan. You can withdraw from your savings whilst repaying a loan but only if the amount of the savings is higher than the amount outstanding on the loan. You can then withdraw the difference between the two. The interest rate is on the loan is calculated on a daily basis and equates to 1% per month. You can also repay further amounts at any time, thus giving you total control over the amount you owe. Once you have paid off a third of the loan you are allowed to take out top up loans up to four times the amount of your savings. There is a dividend paid out annually to members based on how well the union has performed during the year. This is capped at 8% by law, and is based on the average savings over the year. The Credit Union also provides free life insurance so that if a member dies any outstanding loan balance is written off. You can also sign a form to say who you would like to receive the balance of your saving s in the event of your death. Enquire at your local council or citizens advic
e bureau for further details.