By Olivia Ava
If you want to borrow some money to pay for a dream vacation, buy a car or make some repairs to your home, the possibility of your first call port in finding finance will be your bank. After all, you have trusted them to keep your money and their current loan interest rates so why do you go somewhere else?
While it is certainly comfortable to approach banks for loans, the financial application process can be a rocky road and, at the end of all, you might find that your income is not enough to finance payments. Similarly, if you have credit problems in the past, it is very possible that you will be forced to become a punishment rate or have your application lowered together. If this happens, you might try your luck with one of the loan students advertising on television and in the press, or found on the internet. However, there are other choices that many people do not know: local credit unions.
The credit union is a financial cooperative owned and controlled by its members. They generally operate in areas where general low income and offers savings and large value loans to customers. Another benefit of credit unions is they are local, ethical and know what members want. Each credit union has a ‘general bond’ that determines who can join. This bond may be for people who live or work in certain areas, work for the same employer or belong to the same association or club, such as the church or trade union.
The credit union works by asking members to collect their shared savings, which can then provide funds from where the loan is done to other members. The borrower then pays interest on money loaned to them because they will if the loan has been through the bank. Because money in funds belongs to individuals, credit unions ‘rent’ funds from their savers, which receive dividends from the money they rent to credit unions. As a result, credit unions must offer savers well about the money placed in the fund.
To operate, credit unions must succeed in attracting a large number of savers to allow it to accommodate enough liquidity to enable it to meet the demand for loan members, share withdrawals and overheads. Furthermore, dividend payments for savers and Credit Union operating costs must be fulfilled from the profit of credit union, so that strong funds are very important for the success of Credit Union. As a major source of income for credit unions from interest charged to member loans, it is very important that proactive credit unity in marketing the benefits and availability of their services.
For peace of mind, credit unions must be registered and regulated by the Financial Services Authority, which also regulates the Bank, builds the community and all other financial service providers in the UK. Subsequently saving credit union members protected by financial services and compensation schemes (FSCs), which provides safety nets for financial company customers if the company is out of business.
