Are you considering taking out a loan from a credit union? Or you’ve just heard about the lender and want to try it out? Well, before making your final decision, it’s important to learn about what credit unions are and how their loans work so that you can determine if borrowing from them is the best option for you.
What is a Credit Union?
A credit union is a not-for-profit self-help loan co-operative owned and run by its members. Usually, the members pool their savings, which they use to lend to each other at a low-interest rate. Each credit union is comprised of members who share a common bond or something in common such as;
- Worshiping together
- Residing in the same geographical area
- Having the same profession
- Working for the same employer, etc.
Credit unions can be smaller or larger, with some having thousands of members. They are usually non-profit organizations, whereby the funds they make are used to improve their services or reward their members.
Because credit unions act in the interests of all their members, their loans usually have low interest rate and APR. In the UK, the cap on the amount of interest rate per month is set at 3% or APR of 42.6% for credit union loans.
Credit unions ensure that their members don’t take loans they can’t pay back by checking their income and savings before approval.
How to Apply For A Credit Union Loan
If you’ve never borrowed from credit unions before, you might not know how they operate, or you may think they are just like banks. Actually, when it comes to loan application, there are numerous
similarities between credit unions and banks, but with just one key difference, you you have to be a member or partial owner of that credit union. To be accepted as a member, as we said earlier, you have to share a common bond with other members. You’ll also be needed to make a small deposit that is part of the registration process. Once you’ve become a member, you are now eligible for the credit union’s loans.
The loan application process varies from one credit union to another, but most credit unions have similar requirements. Some of them include;
-filling out and submitting an application, either on paper or online
- providing identifying information such as name, address, etc
- You will need to provide proof of income and your debt-to-income ratio.
- You’ll need to be creditworthy, although many credit unions give out loans to members with bad credit.
Once you’ve submitted your application, your loan will be processed, and if approved, funds will be transferred to your bank account.
If you are looking for cheap loans in the UK, you can count on us at nowloan.co.uk to help you find a suitable lender. We have partnered with over 50 lenders to help you find one that suits you. Our service is absolutely free and the loans are approved faster than other loans. Visit our website to learn more about our service.