If you’re thinking about a loan, you may be wondering how credit unions work. Credit unions are member-owned and operated, which means they have different procedures than other financial institutions. Here’s a look at how credit union loans work.
What is a credit union, and what do they offer members?
A credit union is a non-profit financial cooperative owned and controlled by its members. Credit unions offer a variety of services, including loans, savings accounts, and financial education. Because credit unions are member-owned, they don’t have shareholders. This means that credit unions can offer lower interest rates on loans and higher interest rates on savings accounts.
What types of loans do credit unions offer?
Credit unions can offer various loans, including car, homeowner, personal, and saving-secured loans. At Metro Moneywise, we provide the following types of loans to our members:
- Everyday Loan: Borrow from £500 to £5000 at 19.6% APR.
- Aspire Loan: Borrow over £5,000 to £25,000 at 12.7%APR.
- Premier Loan: Subject to a good credit score, borrow from £5000 to £25,000 at 6.2% APR.
- Savings Secured Loan: Borrow double your savings from £5,000 to £25,000 at 3% APR.
- Debt Consolidation Loan: Borrow from £500 to £5,000 at 26.8% APR.
How does the application process work, and what kind of documentation will you need to provide to be approved for a loan through a credit union?
You’ll typically need to first become a member before applying for a loan. During the application process, you’ll need to provide some documentation, such as proof of income and employment – the credit union will clarify which documentation you will need to provide.
The application process can vary, so it’s important to check with the specific credit union you’re interested in.
At Metro Moneywise, you can become a member if you are employed by one of our payroll partners. Once you are a member, you can apply for loans using our easy-to-use credit union app, or you can complete an application over the phone or even by using a paper form.
How do credit unions approve loans?
Once you’ve applied, the credit union will review your application and decide based on their lending criteria. If you are approved for the loan, you will sign a loan agreement and begin making repayments via either Direct Debit or Payroll Deduction.
Credit unions use a variety of factors to approve loans, including credit history, employment status, and income. Credit unions also take into account the borrower’s ability to repay the loan.
At Metro Moneywise, we tend to base our assessments on affordability and credit checks. However, we will always look at your individual circumstances when making a decision.
If you’re thinking about applying for a loan, we encourage you to come to speak to us. We’ll be happy to answer any questions you have and help you through the process.
What is Payroll Deduction, and how does it help members of credit unions get loans?
The Payroll Deduction scheme between credit unions and their partner organisations allows members to have a portion of their paycheck automatically deposited into their credit union account.
This helps members save money and make loan payments on time. Payroll Deduction can also help members qualify for loans, as it shows that they have a regular source of income and because the credit union knows the member’s loan payments will be deducted from their paycheck before they even receive it.
What are the benefits of getting a loan through a credit union instead of a traditional bank loan?
Credit unions offer loans with many of the same features as traditional bank loans but also have some key advantages. Three key benefits of credit union loans are:
- Credit unions typically offer lower interest rates than banks.
- Credit unions are member-owned and operated, which means they may be more flexible in their lending decisions and offer more personalised services.
- Credit unions often provide a range of member benefits, such as discounts on products and services and annual dividends.
There are no hidden fees or early repayment penalties for Metro Moneywise loans.
Are there any drawbacks to getting a loan through a credit union instead of a bank?
There are a few potential drawbacks to getting a loan through a credit union. First, credit unions may have more stringent eligibility requirements than banks. For example, you may need to be a credit union member for a certain period of time before you’re eligible for a loan.
In addition, credit unions may not have branches or cash machines like high-street banks, which can make it difficult to access your account if you’re not near a credit union location.
However, this has become less of an issue due to the rise of credit union apps, online banking, and telephone banking. At Metro Moneywise, we offer same-day withdrawals on available funds when the withdrawal is made before 3pm (Monday to Friday).
Finally, credit unions may not offer the same variety of loans as banks. However, these drawbacks are typically offset by the advantages of credit unions.
Do credit unions offer any other benefits that can help members?
In addition to lower interest rates on loans, and higher interest rates on savings, credit unions often offer a variety of other benefits that can help members take control of their finances. For example, many credit unions provide financial education services to strengthen their communities and help members make informed financial decisions.
At Metro Moneywise, we also pay a competitive annual dividend on your savings. This is unlike a bank where you only earn interest. Your dividend is based on how much you have saved with us over the year, so the more you save, the more you earn!
What should you look for when choosing a credit union to get your loan from, and how can you be sure that the one you choose is right for you?
When choosing a credit union, it’s essential to consider factors such as the credit union’s membership requirements, interest rates, fees, and terms. You should also ensure the credit union is insured by the Financial Services Compensation Scheme (FSCS). This means that your savings are protected (up to £85,000) if the credit union goes out of business.
You can also look for customer reviews of the credit union to get an idea of the level of service you can expect. You may also want to talk to a financial advisor to get expert advice on whether a credit union is right for you.
Are there any other things you should keep in mind when taking out a loan from a credit union?
Taking out a loan from a credit union can be a great way to save money on interest and access personalised services. However, it’s important to remember that you’re responsible for repaying the loan regardless of your financial situation.
Make sure you understand the terms of your loan, including the interest rate, repayment schedule, and any fees or penalties. You should only borrow an amount of money that you’re confident you can repay because missed repayments can damage your credit score.
If you’re struggling to make your loan payments, don’t hesitate to contact your credit union for help. Many credit unions are more than willing to work with you to help you get back on track.
At Metro Moneywise, we understand that life can be unpredictable and financial problems can arise. If you’re experiencing financial difficulties, please give us a call on 01706 298 966, and we’ll do everything we can to help.
What if I have questions about my loan?
If you have any questions about your Metro Moneywise loan, feel free to contact us, and we’ll be happy to help. We’re here to make the process as easy and stress-free as possible.
We hope this article has helped to clear up any confusion you may have had about credit union loans. If you have any further questions, please don’t hesitate to reach out to us!