Many people end up turning to providers of high interest short term loans such as Wonga and QuickQuid, but credit unions are good alternative to such firms.

It’s not uncommon to hear someone saying that they simply felt that they had no alternative but to turn to a payday advance lender because they were in a tight spot. Seeking out a traditional lender such as a bank or building society for a personal loan simply wasn’t an option, the balance on their credit card was already too high, and using an unauthorised overdraft is prohibitively expensive, leading to the last option of high interest rate cash loans – but most people overlook their local credit union as an excellent source of low-cost consumer credit.

your best interests in mind

Credit unions are unique when it comes to how they treat their customers in that they actually have genuine care in their hearts and legitimately want what’s best for everyone involved. This is because every credit union is run not as a business that’s designed to make money but as a not-for-profit organisation.

In addition to the fact that credit unions are not run to make a profit, they’re also completely 100 per cent member owned – everyone who has a savings account or a loan from a credit union is also a member, so the success of each individual member leads to the success of the credit union and vice versa. This leads to the interest rates charged to borrowers to be incredibly low – annualised percentage rates for credit union loans are actually legally capped at 26.8 per cent, though the majority of unions charge only 12.7 per cent APR on their lending, which works out to around £67 in interest on a 12-month £1,000 loan.

COMPETITION HOTS UP IN THE LENDING SECTOR

While it’s true that credit union loans have always been more accessible and less expensive to repay than payday loans, the major marketing point in favour of payday lending has always been their quick turnaround. Many cash shops and purveyors of payday loans online will advertise the fact that you can get your cash the same day – sometimes as soon as a few hours or minutes – and when you’re in an economic bind it’s hard to turn down that easy access to cash.

However, there has been a growing trend amongst credit unions to compete with payday lenders on more even ground by offering expedited loans to those who qualify for them. This means that if you can prove you’ll be able to repay the loan with no trouble, many credit unions are willing to match the swift application turn-around that payday lenders do, thus stripping these legalised loan sharks of every last advantage.

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Image: Renfrewshire-Wide Credit Union by mudricky