Credit Unions - The Answer to a Bad Credit Rating?

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Forget lifes luxuries, with the cost of even the bare essentials spiralling ever upwards, credit cards and loans are now the preferred option to cover day-to-day expenses. But with ever increasing interest rates, credit unions offer a real alternative - especially if your credit rating is too low to obtain credit via the normal means.

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Credit unions are controlled by their members and by operating as financial co-operatives, provide low-cost loans and attractive flexible financial products to their members by combining savings.

To become a member of a credit union, you have to fulfil the criteria of what is known as a common bond. Simply put, a common bond is having something in common with ( mortgage quotes ) the existing members of the union and that could be living in the same area as existing members, belonging to the same organisation/association or being a work colleague of an existing member.

As such, even if you have poor credit rating or are not a regular saver, a credit union may accept you as a member whereas a larger financial institution may not.

Both regular and irregular savers are welcomed by credit unions and the aim is that ( car insurance quotes ) all savers - whether regular savers or not, are paid the same percentage on their savings as a yearly dividend. Typical this is 2 to 3% but as the rate paid is dependent on profits, this can be as much as 8%. (loan quotations)

There are no restrictions on the amount you save and as such, you can pay as little or as much as you like. The frequency at which you make payments is also flexible and whether you pay in (life insurance ) weekly or monthly or whenever you can, payments can be made at your convenience - whether at local shops or handy collection points. Payments can also be taken directly from your wages.

As long as you can prove you are able to save you can borrow money ( life assurance ) based on the amount you are able to repay comfortably and all services can be tailored to your circumstances and requirements.

In keeping with all mutual societies, although each credit union must ( cheap home insurance ) ensure that enough money is available to ensure financial stability, the credit union itself is a non-profit organisation. Any profits made are used to reduce the rates of interest at which money can be borrowed and to increase the rates of interest paid on savings. (cheap life insurance)

For loan repayments, the typical interest rate is only 6% with interest rates capped to 1% per month. So this means that a loan of £1000 can incur no more than £10 of interest per month. Members can also benefit from free life insurance.

Credit unions are governed by various legislation, most notably the Credit Unions Act 1979. This specifies that their accounts must by audited on an annual basis by a qualified auditor, that adequate insurance is in place against theft and fraud and sets out the objectives of the credit union.

Also to safeguard the future of the credit union and the members savings, all savings cannot be lent out and the remaining money must not be invested in high-risk ventures. Any residual money must be invested in government or similar reliable investments or must be put into bank deposit accounts. This also ensures that the money can be returned as and when needed.

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