How credit unions work
Published 16/02/2010 | 05:00
YOU don't need to have an existing account with a lender to apply for a personal loan, but in order to borrow from a credit union you need to become a member first and most usually require you to have a savings record.
Membership of a credit union is open to people who have a 'common bond' with the other members.
In other words, you must share something that links you to a particular credit union, such as being resident of a particular district, or sharing a common vocational interest.
For instance, as well as living in the local area, you might be employed by a company that has a staff credit union or be a member of a professional body that runs its own credit union.
One reason for the much vaunted flexibility of credit unions is that you can repay a credit union loan earlier or make larger repayments than agreed, with no penalty.
Lump sum repayments are also accepted with no penalty.
There are no transaction charges on loans or saving accounts, and many credit unions include free life insurance with their loans. This means your loan is paid off if you die or become permanently disabled.
Credit unions usually pay you a yearly dividend rather than interest on your savings.
The rate given will depend on the level of profit your credit union made the previous year, so it is not guaranteed.