Credit where credit’s due

I’m heading down to Manchester on Friday morning to host the Annual Conference and AGM of the Association of British Credit Unions. Credit Unions are enjoying a real surge in popularity and I’m really looking forward to hearing all about what’s going on in this vibrant sector these days. It’s one of the issues I was asked about recently when I recorded some video for The Daily Record, answering readers’ questions on some interesting money issues. One thing they all wanted to know was the difference between Credit Unions and Banks.



One of the big differences between banks and credit unions is that unlike banks, credit unions are owned by their members and operate with their members’ best interests in mind, not the best interests of their shareholders. Part of the problems we have seen with Banks in recent years is that their desire to boost their bottom line profit for their shareholders has obviously been at the expense of their customers. Credit Unions put their customers at the heart of the decision making process. Let’s take a look at loans. In order to be considered for a credit union loan you will need to be a member of that credit union. A credit union’s membership will be dependent on you sharing a ‘common bond’ with that credit union and its other members; a common bond can be based on where that person lives or works.

Credit unions will work with you as a member to assess what you are able to borrow. For some credit unions this may be based on what savings you hold as a member while for others there may not be a saving requirement and new members can borrow straightaway. However, unlike other providers, credit unions promote sensible lending by making sure that its members can regularly make their repayments and are not borrowing out with their means. Unlike banks and other providers of credit, credit unions are legally capped with how much interest they can charge. Currently this maximum is 3% on the reducing balance each month, totalling 26.8% APR – although many existing credit union members can get a small loan for less than 15% APR, and larger loans are often charged at around 8% APR (or as low as 5.9% APR when secured against savings). As a result, borrowing from a credit union is often far cheaper than other financial providers.

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One Thought to “Credit where credit’s due”

  1. Hi Fergus, great to see you at Manchester over the past two days. The maximum interest rate credit unions can charge rose to 3% per month from April 2014. This was to help support credit unions make smaller loans which would have otherwise been loss making. Can you update your website.


    Solent CU

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