What is a Credit Union?

A credit union is a co-operative organisation owned and run by its members which gives its members access to an easy means of savings and, after building up a savings record, affordable small loans.

Why is a Credit Union needed?

People on low incomes, especially those with young children, often need access to immediate funds which cannot be found out of day to day income. For those of us with a good relationship with our bank or building society and a reasonable income such short term needs can currently be met with a loan at a very low rate of interest.

For people on benefits this is not an option and they have to resort to doorstep lenders such as Provident and Shopacheck or even worse, loan sharks. The doorstep lenders often charge an interest rate in excess of 100% and the customer can end up paying more than double the amount borrowed. With loan sharks the position is considerably worse with APRs in excess of 1000% not unknown and customers being caught up in cycle of borrowing with ever increasing debts and the fear of violence in the case of default.

The credit union represents a much better option for people in this situation with interest rates capped by law at 1% per month on the reducing balance an APR of 12.68%. That means - if you borrow £100 and pay it back over 6 months, you'll only pay a total of £2.50 interest. Even for people with good credit ratings, this is competitive with bank loans up to £2,000.

Members are encouraged to save modest amounts while repaying their loans so building up their own resources and reducing future dependence on borrowing.

Jargon-buster

Common Bond — The thing that gives us a shared interest in each other’s well-being: ours is ‘to live or work in Northumberland’ by which we mean the area administered by Northumberland County Council.

ABCUL — The Association of British Credit Unions Ltd. is the leading trade body. Northumberland Credit Union belongs to it. It sets high standards for member unions, and gives help and advice. 

FSA — The Financial Services Agency is the government’s watchdog for all financial institutions, including credit unions. FSA imposes strict conditions at registration and thereafter supervises us closely with quarterly returns, inspections, audit, etc. 

Free insurance benefits — Northumberland Credit Union loan usually comes with free life insurance cover for members up to age 70. Additionally, for members up to age 65, the insurance usually makes a payment equivalent to the value of savings - in addition to the savings being repaid.