Are they some kind of lender?
Sort of, but not like commercial lenders charging outrageously high rates. Credit unions are financial co-operatives that take deposits and hand out low-cost loans to members. The maximum any union charges is 3 per cent a month, which works out at an APR of 42.6 per cent, a fraction of the annual rate charged by doorstep or payday lenders. Wonga quotes 5,853 per cent, for instance. Some unions charge less. A £1,000 loan from the London Capital credit union, paid back over a year, would cost a total of just £67 in interest, for instance.
Have they got many members?
Around a million in the UK and it’s growing. The UK has more than 520 credit unions, which are often community or workplace-based and always have an ethical stance on finance. And they got a big boost from royalty this week to mark International Credit Union Day on Thursday.
Have they been given a Royal Charter?
No, but they were given the thumbs-up by the Duchess of Cornwall, who said: “I believe credit unions can change the way we talk and think about savings and loans. They can encourage those who have the means to save, and bring in from the cold those vulnerable people who struggle to qualify for loans.”
Is she right?
Yes. The most successful credit unions across the country have made a huge difference to many of their members, who are often financially excluded (they can’t get a bank account) before they open a credit union account. These people get help with saving and budgeting and many move on to having a traditional banking arrangement. The unions also help to keep struggling people out of the clutches of predatory payday lenders.
So should they be given more support?
They certainly should. Find out more abcul.org, the website of the Association of British Credit Unions.Reuse content