What is a Credit Union?
A credit union is a group of people who save together and lend to each other at a fair and reasonable rate of interest. Credit unions offer members the chance to have control over their own finances by making their own savings work for them. Every credit union is owned by the members – the people who save and borrow with it – people like you. When you become a member and start saving with your credit union you will have access to fair and reasonable rates on savings and loans. Your savings contribute to your credit union’s loan fund – so your savings are helping other members – members like you. A credit union exists only to serve its members – not to profit from their needs. Surplus income generated is returned to the members by way of a dividend and/or is directed to improved or additional services required by members. It has been shown throughout history that by working together people can achieve far more through co-operation than by individual effort. The success of the credit union movements worldwide is a clear illustration of this. Credit unions have served their members well for many years and as long as there are active members they will continue to do so now and in the future.
Joining a Credit Union
Joining a credit union is easy once you are within the common bond of the credit union. The common bond is the factor which unites all the members of your credit union – it is what all members have in common. Because of the common bond, all members have the good of their credit union at heart; they know and trust each other. The common bond ensures that the savings of members are available to fellow members as loans. It also enables credit judgements to be made on character and personal record as well as on commercial risk factor. The most usual common bonds are:
• Community bond (where all the members live, and in some cases work, in a particular locality).
• Occupational bond (where all members are in the same profession or occupation, or work for the same employer).
• Associational bond (where all the members are in the same society or association).
When applying for membership you will be asked for proof of ID and proof of address, for example a current passport and recent utility bill. Depending on the rules of your credit union, to be a member there will be an entrance fee and you will need to hold a minimum amount of shares.
The Credit Union Difference
The following points highlight why you should consider joining your local credit union:
• Credit unions are owned by all their members – one member one vote.
• Every credit union is a ‘not-for-profit’ financial co-operative.
• Surplus income generated is returned to the members as a dividend to savers and interest rebate to borrowers or it may be directed to improve or provide additional services for members.
• Membership of a credit union is open to people who have, in relation to all other members, a unique ‘common bond’.
• There are no transaction charges on loans or saving accounts.
• Loans are insured at no direct cost to the eligible member.
• Flexibility – you can repay a credit union loan earlier or make larger repayments than agreed with no penalty.
• Additional lump sum loan repayments are accepted with no penalty.
• The credit union also works in co-operation with the local community – the benefits to the community of this type of lending are enormous. These include employment, community, education and environmental enhancement but there are also economic advantages that the credit union may reap.