Credit Unions – A Safer Way to Borrow

Gloucestershire Credit Union Logo - with permission
Gloucestershire Credit Union Logo – with permission

Stagnant wage rises, ‘zero hours’ contracts, an uncertain economy and the coming cost of living crisis as energy prices rocket – there are lots of reasons why people’s incomes have been feeling more and more squeezed during the past decade. Making ends meet each month can sometimes seem hard. An unexpected repair, a new pair of shoes or an unplanned event can blow budgeting out of the water.

The banks and larger financial bodies don’t seem interested in small loans to people struggling at the lower end of the income bracket. This is where a Credit Union in your area can step in. I have been looking at the role that the Gloucestershire Credit Union (along with many others across the country) plays in helping people in the local community establish financial security in these precarious and worrying times.

Credit Unions’ approach to finance is over 150 years old and it has stood the test of time and is unique in the banking world. They began in Germany in the 1850s and have since spread all over the world:  Gloucestershire Credit Union is now one of over 57,400 credit unions operating in more than 105 countries as varied as Australia, USA, the Dominican Republic and the Seychelles. There are around 500 credit unions in the UK alone. In the decade from 2011 to 2020, the sector increased in membership and loans by 41% and 71% respectively while deposits and assets increased by 135% and 127%,

Credit Unions are Local

The key idea of credit unions is providing a financial service for the local community. For most of us, the banks and other financial bodies that we do business with every day seem distant and controlled by managers and shareholders in places a long way away.  Gloucestershire Credit Union is an alternative which brings financial power down into our communities and puts the people of Gloucestershire at its heart. It’s run by local people for local people and exists to help anyone who lives and/or works in the county to build financial security and have a source of responsible loans if needed. Everyone who has a savings account or loan with Gloucestershire Credit Union becomes a member, and all members have a share of the organisation’s profit at the end of each financial year. They can even have a say in how the credit union is run.

Like all credit unions, Gloucestershire Credit Union is a financial co-operative owned by everyone who has a savings account or a loan with it and who also share the profit made at the end of the year. It specialises in helping people cope with the everyday, offering flexibility to manage their money. The services include adult and junior savings’ accounts, loans up to £10,000 and the Engage Pre-paid Visa Debit card, which enables savings to be easily used to pay household bills and meet domestic needs when needed. Members save whatever they can, however large or small, plus a small amount of any loan repayment is put into a savings account to accrue a nest-egg for the borrower at the end of the loan.

A Credit Union Savings Account is a form of ethical saving. By saving with your local Credit Union, you know your money is being used for the benefit of the local community. As with banks and building societies, your savings are protected by the Financial Services Compensation Scheme (FSCS).  Credit Unions are regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Credit Unions also play a role in combatting the rise of UK payday lenders and dubious loan sharks who charge extremely high interest rates. There are many risks attached to borrowing from a loan shark, for example, you pay far more in interest than you would through any legal borrowing; you might be harassed or threatened if you get behind with your repayments (there have been reports of people being intimidated or attacked); you might be pressured into borrowing more money to repay one loan with another and end up in a spiral of debt that you can never repay. Payday loans can be easy to get but interest rates are frequently high.  

By contrast, Gloucestershire Credit Union is a responsible small loans’ specialist. Once you have been a member for three months you can apply for a loan tailored to your individual situation. People-focused, so there are no nasty surprises hidden away in the small print – because there is no small print. You will know how long it’ll take to repay your loan, how much the instalments will be. There are no early repayment charges, no set-up costs or no hidden fees and borrowers pay less if you pay off the loan early. Credit union interest rates are capped by their regulators which makes then considerably cheaper than many other lenders.

Credit Union Benefits – Source: Gloucestershire Credit Union

Here is what some local Gloucestershire Credit Union members say:

Audrey, Cirencester

“As a debt advisor, I wanted to use Gloucestershire Credit Union to be able to advocate for it when speaking to customers in order to persuade them to save a little and, when needed, to borrow at an affordable rate.  It was easy to set up and having savings separate to my normal bank account means I am less tempted to touch them.”

Sean, Gloucester

“I first became aware of the Credit Union 10 years ago, but only became an active member 2 years ago. I have been both a saver and a borrower, the first and most obvious benefit is the low interest rate, but the self discipline the credit union encourages means that for the first time in my adult life I have become a saver. I would recommend the credit union to anyone working or unemployed.”

A member, Stow-on-the-Wold

“I was in a very difficult financial situation as I needed to stop paying out just interest on my overdraft. The banks didn’t want to help me so I decided to contact Gloucestershire Credit Union and they agreed I could take out a loan with them. So now, not only am I paying off the loan capital, but I am also saving regularly with them which make me feel a whole lot better!”

Emma, Gloucester

“I have always found them easy to deal with especially at times of financial stress when life is often difficult enough without having to deal with the high street banks.  The staff there is friendly and efficient and I don’t feel judged like I have done with banks in the past.  They are more approachable in general and have been such a help to me.”

Al Jack, (Executive Officer, Gloucestershire Credit Union) says:

“Gloucestershire Credit Union is proud to serve the people of Gloucestershire. Every day we see how getting a regular savings habit and building a nest egg can help our members’ manage their expenses without needing to borrow, which reduces the risk of unmanageable debt and improves their mental well-being.”

So if you are experiencing financial difficulties or know someone who is, contact your local credit union for help and advice.

Ed: Here are some useful links:
If you would like to find your local Credit Union, this handy tool will help.
Contact Gloucestershire Credit Union:  )01452 422712/ ✉
Advice on money:
Free and impartial help with money: The MoneyHelper

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