A credit union is a democratic financial co-operative that is run not-for-profit but to benefit its individual members. Every member is encouraged to save regularly and there are loans available that offer a more beneficial and safer alternative to products like payday loans. Union membership is usually offered to those living within a certain area, working for a certain company, or according to some other mutually shared bond. Credit unions exist right across the country and they offer a range of benefits to members.
Though there is little marketing in evidence for credit unions, there are several hundred of them existence across the UK and nearly 1 million people are members of credit unions. Typically, the more members a credit union has, the stronger it becomes as it gives the group greater financial power but even some of the smaller unions still offer excellent benefits to their users and members.
Not For Profit
Credit unions are not for profit organisations. Savers typically earn dividends on their savings and members can benefit from loans but the money that is made by the union itself must be put back into the running of the credit union or paid to members. There are no shareholders to pay, although a board is appointed, and there are no salaries or other excessive overheads that need to be paid. This often affords access to some of the better financial deals that are available on the market.
Credit unions are regulated by the Financial Services Authority and there are certain rules and guidelines set out by the government which must be followed. The government has actually increased the range of services that such groups are able to offer its members and this means that as well as the traditional savings accounts and loans that are available to members it is also possible to access other financial help and products.
Improve Financial Stability Of Its Members
The aim of a credit union is to improve the financial stability of its members. Predominantly this is done through the offering of regular savings as well as the availability of potentially low cost loans. However, it is becoming increasingly commonplace for credit unions to offer financial health checks and offer advice on how best to manage your finances and reap the rewards for having greater control over one’s money.
There are certain criteria that need to be met in order to become a member of a credit union. Different unions offer membership to different people and there is always a common bond between each member of a union. For example, you may find credit unions that are available to residents of a particular area as well as those that are set u specifically for use by people within a certain profession; that work for a certain company; or are members of the same church or other group or organisation.
The interest that is made from loan repayments does not pay shareholders or even pay the salaries of directors. Instead, it is all put back into the running of the credit union or paid as dividends to those that have savings within the credit union. Being a part of a credit union means that you are benefiting the community rather than paying salaries.
A credit union is a democratic organisation. It will have a board of directors in order to make decisions regarding how much of the interest should be paid as dividends and how much reinvested into the running of the union but the board of directors is usually appointed at the AGM ensuring that everybody has a chance to exercise their right.