Why more of us are turning to credit unions

These days items of not just want, but need, tend to be becoming more and more expensive and with interest rates constantly rising at the banks, credit unions are becoming the more financially attractive alternative.

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Credit unions are financial co-operatives owned and controlled by their members who combine savings to offer low-cost and flexible financial products to their members. (secured loans)

Each union has a common bond which determines who can join. A common bond is simply having something in common with the existing members such as living or working in the same area, work colleagues or people who belong to the same association, such as a church or trade union.

If you are not able to save every week or month or have a poor credit record, a credit union may be more sympathetic to your needs than a larger financial institution would be.

Credit unions welcome irregular savers, and all savers usually get the same percentage dividend on their savings aiming to pay a dividend on savings once a year to all their members. This can be as much as 8% of the amount that people have saved, but is typically 2% or 3% depending on profits.

As mutual societies, credit unions are non-profit organisations and must each year ( best mortgages ) set aside enough money to ensure they remain financially stable. All profits are used to make interest rates as cheap as possible for borrowers and rates of return attractive for savers. (life insurance advisers)

With a credit union you can save as much or as little as you like, weekly, ( insurance ) monthly or as often as you wish. You can pay in at convenient local shops or collection points, or direct from your wages.

You do have to prove you can save before you can ( car insurance ) take out a loan with a credit union. Once you have satisfied this requirement, the total amount you can borrow from your credit union is based on what you will be able to repay. They can also tailor their services to suit your individual circumstances.

The interest a credit union can charge on a loan is limited to 1% a month. So a ( medical insurance ) loan of £100 costs no more than £1 each month in interest. (mortgage quotes)

Typical interest rates for loan repayments are just 6% and members can also automatically have free life insurance.

The main act of Parliament governing credit unions was the Credit Unions Act 1979 until 2002 when the FSA (Financial Services Authority) took over as a regulating body. The FSA sets out the objectives of a credit union stating that credit unions must have their accounts audited annually by a qualified auditor and be insured against fraud or theft.

Credit unions cannot lend all their members savings or invest the remaining money in risky ventures. Instead they must put it into bank deposit accounts and the most reliable investments, such as government bonds. This enables them to get the money back if they need to.

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