The Pros and Cons of Credit Union Personal Loans
Low Monthly Repayments Compared to Payday Loans and Pawnbroker Loans
Mar 12, 2009
Credit unions were designed to help ordinary people take control of their personal finances. Members can save money or borrow money when the need arises. Credit unions are formed on the basis of a common bond, such as a shared interest, employer or locality. They work purely for the interests of their members and not for financial gain.
Benefits of Credit Union Personal Loans?
- Non-profit organisations. Credit unions don't have any shareholders. They are non-profit organisations that work exclusively for the benefit of their members. This also means that, unlike banks, there are no pushy sales people trying to get individuals to buy things that aren't in their best interests;
- Attractive APR. Credit union personal loans charge those wishing to borrow money the equivalent of 2% or £2 per month. They present an affordable alternative to both pawnbroker loans that charge about £8 per £100 borrowed or Payday loans that charge £20 per £100 borrowed;
- Affordable borrowing. Members wishing to take out a personal loan from a credit union will need to prove that monthly repayments are affordable. This involves producing a budgetary statement and proving affordability;
- No penalties. It is possible to repay a credit union personal loan at any time without accruing costly penalties. This serves to help reduce the amount of interest paid;
- Debt counselling. Taking out any form of personal loan can lead to money problems. Almost all credit unions have a source of debt counselling on-hand to help members that are struggling to keep up with monthly repayments.
Negatives of Credit Union Personal Loans?
- Low amounts. Credit union personal loans are only available for modest amounts in order to help with short term money problems. Should someone need a personal loan for home improvements, it will still be necessary to approach a bank;
- Money problems. Not being able to make the monthly repayments on a credit union personal loan can feel a lot worse than owing money to a bank because it is a non-profit organisation. This can lead to additional worry and sleepless nights for members;
- High APR. An individual with a good credit rating can secure a lower rate of APR and more affordable monthly repayments with a personal loan from a bank. However, smaller loans tend to attract a higher APR and don't offer the flexibility of credit union personal loans.
Individuals that wish to identify a local credit union should approach their Citizens Advice Bureau (CAB). Although loans offered by credit unions are small, they charge a lower rate of APR than Payday loans and pawnbroker loans. This ensures that monthly repayments are lower meaning fewer money problems for their members.
Those struggling with financial difficulties and personal debt may be interested in finding out whether they have an illegal credit card or unenforceable loan agreement. Individuals that are struggling with serious debt problems may be able to write-off debt with an Individual Voluntary Arrangement.
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