Credit Union loans

Credit unions are small member-run organisations that encourage you to save and manage your money. They offer short-term and long-term loans at affordable rates.

Please contact our specialist debt advisers if you need more advice on credit unions.

What is a Credit Union?

Credit Unions are small financial organisations that offer loans, savings and current accounts to their members only. They are run as co-operatives, owned and managed by their members.

Most Credit Unions are members of the Association of British Credit Unions (ABCUL).

Credit Union members generally have something in common, such as living or working in the same area, being contract-holders with the same community landlord or working for the same employer. Each Credit Union has its own rules.

Credit Unions can:

  • provide low cost loans to members
  • encourage members to save
  • encourage budgeting
  • help with money management.

Borrowing from a Credit Union

Credit Unions provide short term loans, often for small amounts of money. They don’t charge high rates of interest. The law says the amount they can charge is limited to two percent per month, but many charge less than this.

A Credit Union loan could be an affordable alternative to expensive payday loans or doorstep lenders, who have no limit on what they can charge.

Credit Unions may offer you a loan if you have a low income or you claim benefits. They don’t guarantee to offer everyone a loan, but they look carefully at your circumstances when deciding if they can. It’s important for Credit Unions’ members that borrowers can afford to pay back the money they borrow.

Some Credit Unions also offer long-term loans and mortgages. You usually need to have a history of saving with a Credit Union before you can borrow.

Benefits of saving with a Credit Union

Credit Unions encourage saving as a way to help with budgeting your money. If you have some savings, you are less likely to need to take out expensive short term loans.

Credit Unions try to make it easy for you to save by allowing you to deposit money at local branch offices, local shops, by direct debit or through deductions direct from your wages, whatever suits you best.

Credit Unions also provide life insurance for members saving with them.

Money saved in credit unions has the same financial protection as bank savings accounts.

Credit Unions have an upper limit on the amount you can save with them (typically £30,000). The Financial Service Compensation Scheme (FSCS) provides compensation if a Credit Union fails up to a total of £85,000. This means all the money you save with a credit union is covered.

Access to current accounts

Some Credit Unions provide members with a current account.

Joining a Credit Union could help if you can’t open a bank account with a traditional bank, as some banks don’t allow you to open an account if your income is too low.

Problems repaying a loan

Keep in touch with your Credit Union if you have difficulty paying your loan. They may be able to offer you more affordable repayments or help with budgeting.

But if you don’t pay, a Credit Union can take you to court in the same way as any other lender.

Your home is at risk of repossession if you don’t pay a mortgage with a Credit Union. You could lose your home.

How to join a Credit Union

You can apply to join a Credit Union if you have a common bond with its members. This may be through your workplace, where you live or if someone in your family is already a member.

Each Credit Union has its own rules about who can join.

Contact Credit Unions Wales to read more about Credit Unions. You can use the Find your credit union search tool to find one near you.

Phone an adviser

If you have a housing problem, call our expert housing advice helpline
08000 495 495

Email an adviser

If you have a non-urgent problem and would like to speak to an advisor
email us

Did you find this helpful?

This page was last updated on: June 19, 2023

Shelter Cymru acknowledges the support of Shelter in allowing us to adapt their content. The information contained on this site is updated and maintained by Shelter Cymru and only gives general guidance on the law in Wales. It should not be regarded or relied upon as a complete or authoritative statement of the law.