Money Insider: Credit unions are the solution for emergency loans


Missing or being late with a couple of payments on a credit card may not seem much of a big deal to consumers at the time, but these financial indiscretions will damage their credit status and could lead to them paying through the nose for loans in the future.

Although the best buy tables are awash with personal loan rates below 10 per cent APR and countless credit cards advertising 0 per cent interest, people with a recent black mark or two on their credit record are unlikely to be able to take advantage of such competitive deals.

The real problem is that if your bank or building society declines your application for credit, you may end up paying an APR well into three figures to borrow from a non-mainstream lender.

The payday loans industry has grown rapidly during the economic recession, recognising that people are sometimes desperate for some financial breathing space and are seemingly prepared to pay well over the odds for credit.

Borrowing at sky-high rates on short-term loans of 30 days or less is becoming far more common, and now some lenders are targeting longer-term borrowing markets.

A quick look on the internet will reveal that loan brokers such as are advertising unsecured loans for terms of 12 months at eye-wateringly high rates of up to 278 per cent APR.

If your own bank isn't prepared to lend to you and you're desperate to borrow money to help get the car through the MOT or get the central heating boiler fixed, then a one-year £500 "payday" loan could see you having to pay back £949 over 12 months.

The problem for borrowers with minor credit issues (we're not talking about serial defaulters with a number of CCJs) is that they don't realise there are other options available to them.

While consumers need to be aware of the importance of maintaining a good credit record, the Government should take a more active role to prevent greater numbers of consumers getting into serious debt problems through easy and expensive credit.

In March this year the Government announced it would make up to £73m available to expand and modernise credit unions over the next four years.

As part of this expansion programme it is considering making credit unions available to communities through the UK Post Office network. There are 465 credit unions in England, Scotland and Wales with more than 870,000 members. The value of loans made to members stands at £475m. However, more importantly, there is proof that they encourage people to save too, with more than £600m of credit balances held with British credit unions.

Mark Lyonette, the chief executive of the Association of British Credit Unions Limited, summed up the situation many people face: "Credit unions have shown they can provide the financial products and services that people on lower incomes need and want but often struggle to get elsewhere."

With Citizens Advice reporting a fourfold rise in the number of people with payday loans coming to it for debt advice in the past two years, the promotion of the credit union alternative needs ramping up, and fast.

Interest rates up as euro crisis bites

The eurozone crisis is starting to affect the man in the street.

The knock-on effect means mortgages are getting dearer, while on the flip side, savers are seeing higher interest rates.

The latest issue of the online instant-access account from AA Savings (Internet Extra) sits proudly at the top of the best buys paying 3.2 per cent gross/AER.

There is the customary bonus element included in the rate (2.7 per cent fixed for 12 months in this case), but it's not really asking too much for customers to make a note in their diary, iPhone or even on the kitchen calendar to switch their nest egg elsewhere when the bonus expires.

Banks are often criticised for their use of promotional bonuses, but a little organisation on your part means you can beat them at their own game.

The AA account is operated online and allows unlimited, penalty-free, instant access to your funds with interest paid annually.

Considering the best one-year, fixed-rate bond was only paying 3.25 per cent at the start of 2011, consumers have benefited from increased competition, and with banks looking to draw in more money via their branches, maybe we'll see some even better deals for beleaguered savers in the next month or two.

Andrew Hagger –

Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Steve Bruce and Gus Poyet clash
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths
Life and Style
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
Amazon misled consumers about subscription fees, the ASA has ruled
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive - OTE £40,000

    £15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

    Austen Lloyd: Law Costs HOD - Southampton

    £50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

    SThree: Recruitment Resourcer

    £20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn