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Doorstep Loans

Doorstep Loans

  • Cash sums up to £2500 (subject to affordability)
  • Repay over 13 - 104 wks
  • Fixed weekly payments
  • Friendly home service
  • No bank account needed
  • Multiple loan options

Credit Unions

Credit unions are nothing new in the UK but are a great option for anyone in need of an injection of cash when times get tough. Many of us struggle to save and put money aside for those financial crisis points and that’s where a credit union can come in really useful, offering a solution to immediate – and often unexpected – money needs with a low rate of interest.

What is a credit union?

A credit union is a not for profit co-operative and is usually set up by a group of people in a community who share a common interest or bond. So, for example, a credit union could be made up of individuals who all work for the same employer or live in the same location. Other common binding factors may include belonging to the same club or trade union or working in the same geographical area. Credit unions have two main functions: accepting savings deposits and offering loans.

While credit unions are regulated by the same bodies, and the same rules, that mainstream banks and building societies are controlled by, the big difference between a credit union and most other financial institutions is that credit unions are run for the benefit of their members, rather than the benefit of profit-seeking shareholders. This allows them to offer a broader range of products and to provide financial support where other institutions might not.

Using a Credit Union

Pros

  • If you’re not keen to borrow from a mainstream financial institution, whether as a result of a lack of trust or a preference to deal with a local organisation, credit unions are a great alternative.
  • If you don’t have a fantastic credit score and this excludes you from mainstream borrowing a credit union offers another option.
  • Interest rates are capped at no more than 3% per month - 42.6% APR.

Cons

  • If you’re not a member of a credit union then you cannot apply for a loan from one.
  • It can take time to become eligible for a loan with some credit unions, as they may require members to build up savings first.
  • The maximum loan period is 5 years on an unsecured basis. For longer loans (up to 10 years) you will need to provide security (car or house). A few credit unions may lend over a 25 year period.

How to Borrow from a Credit Union

In order to be able to borrow from a credit union, you need to be a member. Membership relies on one of the common interests or bonds mentioned above. If someone in your household is a member then others who live under the same roof may be able to join too. Some credit unions can lend to new members straight away, others may require members to build up some savings first.

Most credit unions will be able to offer loans with a term of between five and ten years, although some may offer borrowing over a longer term. For loans of more than five years, the borrowing is secured against a property so you need to be a property owner in order to be able to access longer-term credit union credit.

While each credit union is different, in general rates of interest when borrowing from a credit union are lower than mainstream borrowing and will never be more than 3% a month. Most charge interest at 1% a month.

One major difference between a credit union and a mainstream institution is that credit unions act in the interests of all their members and that means they try harder to avoid allowing members to borrow credit that they can’t afford to pay back. This judgment is based on an individual’s income, as well as (in some cases) how much cash they have already saved with the credit union.

Answers to Frequently Asked Questions

Do you have to be a member of a credit union to borrow from one?

Yes. Some credit unions may also require you to build up a pool of savings before you can borrow from them.

If your local credit unions do require this and you need a little cash now then you could consider a doorstep loan although keep in mind that these loans are likely to be more expensive than a loan from a credit union.

How do you join a credit union?

You need to find the right credit union for you initially and then apply to join – this may require you to provide identification (unless you are joining a credit union that is run by a trade union you are already a member of).

Is credit union interest always low?

Yes, there is a cap on the amount of interest a credit union can charge on loans - 3% a month or 42.6% a year APR. Most credit unions charge around 1% a month.

What’s the longest available term for a credit union loan?

Most are five or ten years but some credit unions may be able to lend for up to 25 years – on a secured basis (i.e. by taking security over something such as a property you own).

How do you repay a credit union loan?

You have all the options you would have with any other type of finance, such as direct debit. You can also make the payments face to face and if your employer has a link with the union, the payments can be made from your wages, direct. Some credit unions can also provide you with a Paypoint card and you can use this to make payments on the loan at a local shop.

Can you repay a loan from benefits?

Some credit unions will allow a set up whereby your benefit is paid directly to them, the loan repayment amount is deducted, and the rest of the benefit paid on to you.

Can you repay early with a credit union?

Yes, there should be no early repayment charges.

What happens if you don’t repay a credit union loan?

The penalties for not repaying your credit union loan include cancelled membership and potential court action to ensure repayment of the loan. If your home was provided as security for the loan then you could lose your home.

Do credit unions pay dividends?

No, as there are no shareholders – and credit unions are run on a ‘not for profit’ basis – money that would have been paid to shareholders in a normal financial institutions is instead used to reward members and improve their services.

Compare the price of home collected and other cash loans available in your area at www.lenderscompared.org.uk.

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