Borrowing

Is a Credit Union the Best Place to Borrow Money?

There are many places that we can go to, to borrow money. Often a credit union is recommended as being a cheaper option than some alternatives but is it really the best place to go? Many of us do not know much about them but it is worth finding out as they could be a useful option.

What is a credit union?

A credit union is a local organisation which will provide banking services for its members. They can be run by business or often by churches and they will often lend to people even if they have a poor credit record. Their interest rates on loans tend not to be as high as some alternatives particularly payday lenders or doorstep lenders. They will offer smaller loans, like these people do but may also be prepared to lend higher amounts of money. Their interest rates are legally capped at 42.6% APR which may seem expensive but is a lot cheaper than some poor credit lenders. They have insurance tied into the loan so it is automatically paid off if you die and there are no charges for early repayment. As well as offering loans, they offer savings accounts and some offer current accounts. The current accounts tend to be basic and without an overdraft or chequebook so you cannot get into debt but you will usually get a LINK cash card for use at ATMs. The savings accounts are ethical as the money you save is lent to other members. You will often be paid in dividends rather than interest but this will vary depending on the credit union. You can normally set up direct debits and standing orders. It is a type of co-operative so everyone is a member. Credit unions are authorised by the Financial Conduct Authority meaning that you can get protection for the first £85,000 that you have saved with them.

Will they lend to me?

You will have to be a member in order to set up an account with them. Whether you will be accepted may depend on certain criteria such as where you live or it could be part of a trade union or club or you may have to belong to a certain industry. These criteria will vary between credit unions and so you will need to check whether you can join any. Start by looking locally as local ones may accept local members, then consider whether you are in a business that might have one and you could ask around at work about this. They tend to be happier to lend to those with a poorer credit rating compared with standard banks, but they may have criteria. They may, for example, expect you to save with them regularly first, so that you can prove that you are capable of making regular payments. It is worth looking on the website of your local credit union or going to visit them to find out more.

How do they compare?

As they all differ then it is not easy to just compare them with other lenders by grouping them together. You will need to look at your local one and then look at how they compare. There are a few general things though that could apply to them all.

Firstly, they will be able to give you impartial financial advice. They are not profit making and so they do not take on loans for the sake of it. They will be able to talk to you about whether a loan is a good idea for you or whether there are any other solutions they feel will work better. They also will look at the loan types and amounts and advise you on which will suit you.

It is worth being aware that they may not have the same opening hours as high street banks. It might be that they just open a few days a week or just mornings. Do check on their website as this could impact you if you are hoping the visit them, perhaps on a Saturday or whatever, when they may not be open. They may not offer online banking and so this may mean that the only way that you can organise a loan is to go in and talk to them. You may have to therefore take time off work to do this. Repayments will probably be able to be done by direct debit though which will mean that you can do this without having to go into the branch and so you may only have to visit once.

Their rates of lending tend to be good, particularly if you do not have a good credit record. They may still lend to you even if you cannot get a loan from a bank and the rates are likely to be better than you will get from a payday loan. You will need to check this though as it may not be the case for all of them.

Loans

Should I get a Loan to Improve my Garden?


If you want to do some improvements to your garden, then you may wonder where you will get the money in order to do this. The most obvious place could be to get a loan, but will this be a sensible idea? It is worth thinking it through to decide whether it is a good decision for you.

Disadvantages of a Loan

Although a loan can be a handy way to get money quickly, it does have disadvantages that are worth considering before you take one out. Firstly. The loan will cost money. You will be charged interest and possibly fees and that will have to be repaid on top of paying back what you borrow. It is worth calculating how much extra you will be paying compared to if you used your own money, perhaps by saving up. You can then work out whether you think the loan will give you good value for money.

You will also have to repay the loan. This might be by making regular repayments or you may be able to repay it on a more ad hoc basis if you have an overdraft or credit card. Make sure that you are fully aware of how the repayment process works and make sure that you are confident that you will be able to cover those costs when you need to. Sometimes loans will vary so it is good to be aware of how they vary so you can choose one which suits you better.

Comparing Loans

It is therefore worth looking at what sorts of loans might be the most suitable for the amount of money that you want to borrow. Some loans are better for borrowing large amounts of money and some for smaller amounts and so it will depend on how much you want to borrow. They will also vary in price and so you will need to look at that and think about how much you are prepared to pay for the loan. You will also need to consider the repayments and what you can afford. You may prefer a fixed monthly instalment or you may be happier with a more flexible approach, which could potentially be more costly. You may also want to take a look at the lenders and see how they differ. There may be some lenders that you prefer, perhaps because of reviews you have seen, how well they treat their customers and things like that. It is important to try to think about everything when you are comparing loans as although the cost is very important, other factors will be influential as well.

Alternatives to a Loan

It is also worth considering whether there are any alternatives to borrowing money. If you have any savings then it might be wise to use those instead. It will be a lot cheaper and you will not have to worry about repaying the money. You will be about to repay into the savings account in the same way that you would make repayments on a loan.

If you have no savings, then it could be wise to save up rather than borrow. This will be cheaper and less risky. You could open a savings account and regularly pay money into it in the same way that you would make loan repayments. It will mean that you will have to wait to get your garden improved but it will be cheaper this way. You may find it hard to wait but it will give you time to consider all of your options and you may find an even better plan for your garden while you are waiting.

So, it is tricky to say whether you should get a loan to improve your garden. It is worth thinking about whether you really need to improve it and whether the loan will give good value for money. Consider alternative solutions as well and see whether you really think it will be the right thing for you to do.

Loans should be thought about really hard. You should always consider whether you really need the money or if you can do without. So, think about what you will be sending it on and decide whether it really will be worth it. Consider how much pleasure you will get out of the garden and whether there is a less costly way to still get that amount of pleasure out of it. It may be that you can do some of the work yourself, source items for free or second hand and perhaps get some friends or family members to help out. Also think about whether the effects will be long lasting or even if you get the garden tidied and redesigned, whether it will stay tidy for long or if you will find it hard to maintain.