Credit union loans

Credit unions can provide an alternative to mainstream personal loans and banking, providing a responsible lending service and savings products for members.

If you’ve been turned away from high-street banks and other lenders, a credit union could be a good place to turn to. Credit union loans are significantly cheaper than payday loans or doorstep lending.

Credit unions aim to help their members navigate financially challenging times, so they can get back on their feet and contribute to helping others.

What is a credit union?

Credit unions are not-for-profit organisations that allow people within a community or organisation to save and borrow money.

They often aim to provide socially responsible financial services as an alternative for people who require personal loans, savings accounts, and even mortgages.

The UK has around 450 credit unions, so there should be one in your area.

How credit unions work

Credit unions are member-run and led by a council of elected volunteer members, with paid professionals managing the day to day business and technical side of the union.

Usually in order to borrow, you must already have a savings account with the credit union – although there are an increasing number of credit unions who no longer insist on this.

Members are usually local, or belong to a common society, trade union or religious group.

Profits made by the credit union are used to improve the service and provide a better return to savers. They usually focus on responsible lending and offer help, plans and guidance to members facing financial difficulties.

This means that credit unions can provide an alternative to banks and payday loans for those in need of access to credit.

What is a credit union loan?

Most credit unions offer personal loans over a two to five year repayment plan, and ten years for secured loans, although there are some who may offer longer repayment periods.

The interest on credit union loans can compete with many lenders in the personal loans' marketplace.

Their rates are usually a bit higher than the cheapest credit cards and loans, but if you’re often turned down for credit, these rates can work out much cheaper than some alternatives.

Most credit unions emphasise that you should talk to them and warn them if you’re struggling, so they can find ways to help with a new payment plan or some other remedial measures.

Though it’s worth noting that a credit union will still consider applying penalties, fees and other consequences if you default on your borrowing.

If you search for loans with Experian, we’ll include credit union loan offers if they match your credit information. All credit union and community lender products are marked with a ‘Community Loan’ badge. You can search for loans as many times as you like – it won’t damage your credit score.

Just remember, we’re a credit broker, not a lender.† This means we can help you find deals, but we don't provide credit or decide whether to approve you.

Can I get a loan from a credit union with bad credit?

Quite possibly, it will depend on your individual circumstances. You’ll need to become a member, and some credit unions require you to save with them first. When applying for a loan, credit unions will take into account your whole personal situation, not just your credit rating. As credit unions are owned by members and driven by member needs, they are often more flexible than banks when it comes to issuing credit. But there are no guarantees – they will still make an assessment of whether you can afford the loan.

If you need a loan but are worried about your credit history, see our guide on getting a loan with ‘bad credit’.

How long does it take for a credit union to approve a loan?

This can vary. Typically, credit unions take between one and 10 working days to make a decision on whether to approve a loan.

Other credit union products and services

Credit unions also offer savings accounts as well as loans. These accounts offer returns that depend on how well the union performed, and are usually paid as an annual dividend.

Credit unions aim to improve financial education and encourage better money management, so you may find that you are required to regularly deposit a small amount into your savings account.

Some credit unions will offer mortgages, but these tend to have higher rates than mortgages on offer from conventional banks and building societies.

Alternatives to credit union loans

A credit builder credit card can help improve your credit rating and give you access to credit that may have otherwise been unavailable to you.

However, if you do apply for a credit builder card be wary of the relatively high APR. If you do plan to borrow on these cards, then make sure you pay it off as quickly as possible. Repay on time and in full each month to avoid paying interest. When you first get a credit card, it might briefly cause your score to drop. But used well, it can help you build your score over time.

A consolidation loan may not always be the best option if you’re already struggling with debts, but they could help you reduce your monthly repayments (though you may end up paying more in the long term).

Make sure to carefully consider all your options and if you are struggling you can seek out free financial advice from a few charities and government organisations.