Credit Union Loan Alternatives
Little Loans is a credit broker and could help you search for a credit union loan alternative from £100.
What is a credit union and how do they work?
What’s a credit union loan – and could this be an option if you need to borrow money?
In our guide, we’ll be looking at how credit unions work in the UK.
What is a credit union?
A credit union is a ‘financial cooperative’.
Unlike mainstream banks and providers, which are typically owned by external shareholders, credit unions are owned by their members. This means that when you join a credit union, you become a part-owner.
Credit unions offer similar services to traditional banks, but with a focus on helping members save money and access affordable financial services, rather than profits.
All credit unions offer savings accounts and loans.
How does a credit union work?
Generally, a credit union works a little like this:
- Members save money in a credit union savings account. Members can withdraw and top up their money whenever they like.
- If needed, members can apply for a loan which, if approved, is paid out of the credit union’s collective pot of money.
- Interest is charged on any money borrowed and paid back into the pot to help keep the credit union running.
- At the end of the year, any money left over will be paid to members as a ‘dividend’, which is a reward for saving.
Who can join a credit union?
To join a credit union, you must share a ‘common bond’ with existing members.
This could include:
- Living in the same area
- Working for the same employer (for example, the NHS or the police force)
- Belonging to the same church
Are credit unions authorised and regulated by the Financial Conduct Authority (FCA)?
Yes. In the UK, credit unions are dual authorised and regulated by the FCA and the Prudential Regulation Authority (PRA).
Savings up to the value of £85,000 are protected by the Financial Services Compensation Scheme.
How can I find a credit union?
You can search for a credit union using the Find Your Credit Union website.
What is a credit union loan?
A credit union loan is when you borrow a sum of money from the credit union you’re an approved member of.
You may have wondered, how do credit union loans differ from loans offered by mainstream lenders?
Like a standard loan, you’ll repay the money, including interest, in instalments over a set period of time.
Who can get a credit union loan?
You must be a member of a credit union to be considered for a loan with them.
It’s worth noting that each credit union may have its own eligibility criteria that you’ll need to meet before you can be considered.
Some credit unions specify that you must have money in your credit union savings account before you can apply for a loan.
Credit union loans for bad credit
You could be eligible to apply for a bad credit credit union loan, although this will depend on the credit union as well as your individual circumstances.
Good to know: having bad credit doesn’t necessarily mean that you can’t be considered for a loan with a mainstream lender. Several of the lenders on the Little Loans panel specialise in loans for people with bad credit.
Credit union loans: how much money could I get?
The amount of money you could apply to borrow, and the repayment term you can choose, will depend on your credit union.
Whether you’re applying for a loan with a credit union or a traditional high street lender, you should never apply to borrow more money than you need or can afford to repay.
Will I pay interest on a credit union loan?
Yes, you will be charged interest when you borrow money from a credit union.
Credit unions are capped on the amount of interest they can charge. That means the annual percentage rate (APR) - which shows the yearly cost of borrowing - will never be more than 42.6% in England, Scotland and Wales, and 12.68% in Northern Ireland.
Is Little Loans a credit union?
No. Little Loans is a credit broker. If you’re looking for a credit union alternative, Little Loans could help.
The 50+ direct lenders on our panel offer short-term personal loans between £100 and £10,000. Repayment terms are available from 3 to 60 months. Please note that the repayment terms available to you will depend on the amount of money you’re approved to borrow.
Searching for a credit union loan alternative with Little Loans
You can use Little Loans to search for a personal loan from £100 if you:
- Are over the age of 18
- Are a UK resident
- Have a UK bank account and valid debit card
- Have a regular source of income paid into your bank account
All credit scores considered.
The Little Loans journey
- Fill out our online form – this should take around 5 minutes.
- Using the information you’ve provided, we’ll run a soft search with no impact on your credit score.*
- Next, we’ll scan our panel of lenders for a suitable loan. If you’re matched with one of the lenders on our panel, you’ll be redirected to their website.
- Happy with the loan? If you choose to make a full application, the lender will complete a creditworthiness assessment.
- If you pass the lender’s checks, they’ll let you know when your money will be sent. Some of the lenders on the Little Loans panel could send your money on the same day as your application is approved.**
What happens if I can’t repay my loan?
If you’re finding it difficult to make your loan repayments, it’s important to speak to your lender, whether that’s a traditional lender or a credit union, as soon as you can. They’ll be able to talk you through your options.
It’s also worth noting that you can get free, confidential financial advice through several charities and organisations, including StepChange, MoneyHelper, Citizens Advice and National Debtline.
*Little Loans uses soft search technology, which will not affect your credit score. However, if you choose to make a full application with a direct lender, they will complete a creditworthiness assessment, which will include a hard search or an Open Banking check. A hard search will be visible on your credit file for up to 12 months. Multiple hard searches in a short space of time could have a negative impact on your credit score.
**Payout timescales vary between lenders. The time it takes for the money to show in your account will depend on your bank’s policies and procedures.
Representative example: Amount of credit: £1000 for 12 months at £123.40 per month. Total amount repayable of £1,480.77 Interest: £480.77. Interest rate: 79.5% pa (fixed). 79.5% APR Representative. We’re a fully regulated and authorised credit broker and not a lender