Credit unions are communities that come together and pool their savings in order to lend to each other and help run the union. Credit unions are cooperatives that are owned by its members, who run it for their own benefit by utilising the credit union’s services.

Members of a credit union are all connected to one another via a common bond of some sort. This can be something as simple as living in the area, to having the same employer or profession.

Credit unions are nonprofits that use the money they make to improve their services or reward members, instead of paying shareholders. Additionally, those who find themselves in financial trouble are more likely to be accepted for a loan by a credit union than other financial institutions.

They are all regulated by the Financial Conduct Authority and the Prudential Regulatory Authority, with a FSCS savings protection limit of £85,000.

Around 2% of the UK population is a member of a credit union, and there are around 500 credit unions in the UK. In Ireland, as much as 70% of the population belongs to a credit union.

All credit unions have savings accounts and loan accounts on offer, and some of the larger credit unions have even more services and products.

There are quite a few benefits to taking out a loan with a credit union as opposed to one of the alternatives.

Credit unions aim to provide low-cost loans for their members. Furthermore, they aim to help their members who are in need of financial assistance or advice. This means that they act in their members’ interests, and will even prevent a member from taking out a loan they are unlikely to be able to pay back.

Credit unions will assess your income and your savings in order to determine your eligibility for their services, and there is even a cap on the interest that they charge on their loans.

The first thing you’ll need to do is become a member of a credit union. This may involve providing some forms of ID, and you may also be required to build up a savings account with the credit union first before they’ll allow you to take out a loan.

By law, credit unions cannot charge more than 1% interest per month in Northern Ireland and 3% per month in the rest of the UK. The majority of credit unions will charge an average monthly interest rate of 1%, though some may be even lower than this.

Unlike with many other forms of borrowing, there are no hidden charges, and you will not have to pay a penalty if you repay your credit union loan early.

Another benefit of taking out a credit union loan is that credit unions will include life insurance with your loan for no extra cost. This means that if you do pass away before the loan is repaid, the balance will be paid off on your behalf.

As for the duration of the loan, the majority of credit unions will lend for up to five years for an unsecured loan, and up to ten years on a secured loan.

There are various ways in which you can pay back your credit union loan, though some options may not be offered by all credit unions. You can make payments:

• In person
• Via Direct Debit
• Via your wages (if your employer is linked to the credit union then you can have loan repayments taken out of your wages)
• Via Paypoint (some credit unions will give you a Paypoint card which can be used to make your loan repayments)
• Via your benefits (some credit unions will take your loan repayments out of your benefits and then pay the remainder to you directly)