Credit Unions – A Lifeline For Those With Bad Credit

Credit unions are a fantastic way for people who are desperate for a short term loan but don’t have the credit rating or score to obtain one.

Credit unions are a non profit organisation set up by members in the community with its goals to aide and assist its members without necessarily seeking a profit. Despite these ideals credit unions are regulated just as any bank, whose members are the share holders, and are entitled to a summary report of the company’s progress just as any share holder in a private company is entitled to.

The fantastic thing about credit unions, since they are not aimed at making a profit like a standard bank or building society; is any profits made is given back to the share holders as dividends, usually at the end of the financial year.

Credit unions usually accept membership from people located in their local area, as they tend to focus on helping the community and forging relationships as they are in it to help one another as opposed to making a profit.

It works by members agreeing to save a regular amount every week, every two weeks, or monthly, it can be as small or as large as the member wishes, unlike other regular payment schemes from banks and building societies. Members also have the benefit of being able to with draw that money whenever they want with no penalties. Credit unions are a fantastic way for people to save without some of the problems or pressures that might be associated with a standard bank or building society.

Credit unions also offer loans, which is the primary reason many people join them as their loan APR (Annual Percentage Rate) is significantly lower than you would find in any bank or building society, so it is very attractive for those desperate for a loan but do not want to pay extortionate rates, especially when their credit rating isn’t the best. Although an initial credit check might be done, potential members who have bad credit need not be alarmed, as the loan can still be offered regardless of how poor their credit rating is, but not all credit unions offer loans to new members, they usually have a stipulation that membership must have continued for a certain period before being granted a loan, those that do grant loans to new members, also ask that they sign a mandate via direct debit to be sent to their bank to commence regular savings (which can be as large or as negligible as the applicant wants).

Long term members are also entitled to a loyalty advance, a kind of short term loan at short notice, again at very low interest rates.