Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk. Representative example: £400 borrowed for 30 days.
Total amount repayable is £459.36. Interest charged is £59.36, interest rate 180.5% (variable). Representative 728.9% APR.
We are a licensed credit broker, not a lender.
You are only minutes away from a decision!*
Whilst payday loans are a relatively recent financial product in the United Kingdom, credit unions have been in existence since the 1960s. Offering a range of services to their members including current accounts, savings accounts and loans, they are often lauded as an alternative to payday loans. We take a look at credit unions, what they are and whether they do offer a genuine alternative to payday loans.
Credit unions are financial co-operatives that are owned and run by its members. They generally exist in specific geographic areas and communities where all the members have a common bond. This could be all living in the same town or housing estate or it may be a credit union where the common bond is that all members are employed by a particular organisation. Most credit unions provide current accounts, savings accounts and loans for their members.
Credit unions are quite simple in how they work. The members of the credit union save regularly together to build up a pool of money. Members can then apply for a loan from the credit union’s pool of money when they need it and are required to repay it back just like a bank loan. Interest rates are generally quite good thanks to their co-operative status.
Essentially, they are different because credit unions are owned by the members and run by the members. That means that there are no call centres or fancy websites. Users deal with real people from their own local community. Unlike banks that are there to make a profit for their shareholders, any excess income from credit unions are returned to the members.
Credit unions have been cited as being a good alternative to payday loans. This is because people can apply for small loans of up to £500 at a lower interest rate than they may get from a payday loan provider. But a closer inspection of the situation reveals that generally credit unions are generally not a good alternative to payday loans. This is for three main reasons:
Credit unions can be an alternative to payday loans but in most situations that people require payday loans, they simply are not suitable.