Frequently Asked Questions
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About credit unions
What is a Credit Union?
A credit union is regulated by the Financial Services Authority. It is a not-for-profit organisation which operates as a financial co-operative and offers services such as saving accounts and low-cost loans to its members.
In a credit union, members pool their savings to lend to one another and may also help to run the credit union. The small amount of interest raised by loans pays for credit union overheads (passbooks, etc) and any surplus may be paid out as a dividend to members who have savings.
Why join a credit union?
Credit unions aim to help you take control of your money by encouraging you to save what you can. Once you have a reliable record as a saver, you can apply to borrow money from them. They will let you borrow what you can afford to repay. Some credit unions offer Christmas savings accounts where you cannot take your money out before November without notice. So you won't be tempted to take it out, but you could be earning a dividend– so your money could grow.
I've already got a savings account with a bank or building society, why should I join?
Some members make an ethical choice to save regularly with their local credit union, in addition to using savings accounts from high street banks and building societies. In this way, members are choosing to support their local community and their local economy by helping the credit union to establish a big pool of savings which can then be lent out to members who need a loan. Your money is safe and you could be earning a dividend. Generally speaking, if more local residents borrow money from their local credit union instead of using doorstep lenders, pawn brokers and pay-weekly stores, less interest is paid back. This means that residents have more money in their pockets to spend on things they need, benefiting them individually, plus the local and regional economy.
Is my money safe?
All money paid into a credit union is safe and secure, because credit unions are covered by the Financial Services Compensation Scheme (FSCS) in the unlikely event that a credit union closed down.
The FSCS can pay compensation to depositors if a credit union is unable to meet its financial obligations. Most depositors – including most individuals and small businesses – are covered by the scheme. In respect of deposits, an eligible depositor is entitled to claim up to £50,000. For joint accounts each account holder is treated as having a claim in respect of their share so, for a joint account held by two eligible depositors, the maximum amount that could be claimed would be £50,000 each (making a total of £100,000). The £50,000 limit relates to the combined amount in all the eligible depositor’s accounts with the credit union, including their share of any joint account, and not to each separate account.
For further information about the scheme (including the amounts covered and eligibility to claim) please ask at your local credit union, refer to the FSCS website or call 0800 678 1100.
Who runs the credit union?
All credit unions are run by members who are elected to the Board of Directors. Everyone involved in running the credit union is a volunteer and has to be passed as an ‘Approved Person’ by the Financial Services Authority (FSA).
Are there any opportunities to volunteer?
All credit unions listed in the London Money directory are really keen to increase the number of volunteers and actively encourage volunteering. Many credit unions are also looking for new Board Members who can bring a range of skills and experience to the Board of Directors. Please contact your local credit union for further information.
What is a ‘common bond’?
A common bond is the group of people who are eligible to become a member of that credit union. All the credit unions in the London Money directory have ‘live/work’ common bonds, which means that members must live or work in a particular geographical area. Other credit unions may have different common bonds, for example:
- employees working for the same employer regardless of where they live (i.e. Police credit union)
- people belonging to the same trade union, church or other association.
The website http://www.findyourcreditunion.co.uk/ includes credit unions with all types of common bonds.
How many credit unions are there in my area?
There may be one or more credit unions open to anyone who lives or works within your postcode area. Use the postcode search on the London Money website to find out more.
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Becoming a member of a Credit Union
What is the age limit?
Credit union membership is open to anyone, any age, living in the ‘common bond’ area. Junior savers can be members from birth until their 16th birthday and Adult savers are aged 16+. There is no upper age limit.
How do I join and what information do I need to provide?
To open an account for junior members, only a birth certificate or passport is required. For adult members you need to be able to provide 2 forms of identity, plus your National Insurance number. Passport and driving license are ideal, but if these are not available, a utility bill (dated within the last 3 months); bank statement; mortgage/rent statement/card; benefit letter etc should suffice. Your chosen credit union will have a list of other suitable ID - contact them directly for more information.
How much does it cost to join?
Adults pay a small joining fee (usually between £1 and £5, depending on the policy of the credit union). Junior membership is free. There may also be a small annual fee to pay (again in the region of £1 - £5) so check with your local credit union for details.
I am already a member of the credit union where I live/work, can I join another?
You can be a member of more than one credit union as long as you qualify under the “common bond” rule of living or working within a designated area. So if you live in Kent you could be a member of Kent Savers, but you could also become a member of a London credit union if you work in London.
How can I pay in my money?
Deposits/payments can be made by cash or cheque at collection points or by standing order from a bank account. Some credit unions can accept benefits direct into your account. Some will accept deposits and repayments through PayPoint at many local service points, e.g. at your local newsagent. Contact your chosen credit union to find out how they take deposits.
How will I know the balance on my account?
If a credit union has an online balance facility for members, their website homepage will usually give you this information, usually in the form of a clickable link. Most credit unions issue statements at least once a year, depending on the credit union, but they can always be made available on request. A balance enquiry can be made in person at any collection point or main credit union office. Some credit unions will give you your balance over the telephone; alternatively they will send it in the post to you following a telephone request. You will to have to either produce ID or answer security questions.
Do I get interest on my savings?
No. However each year the credit unions try to reward members who save by paying them a dividend (which is a share of the profit or surplus made). The amount of the dividend paid is decided by members at the Annual General Meeting and can vary between 0% and 8%.
Do I have to save the same amount each week? What if I miss a week?
There is no minimum to the amount you can save each week and you can save as often / as much / as little as you wish. There are no penalties if you don’t save regularly, although if you do wish to apply for a loyalty loan in the future, your savings history will be taken into account and this may affect the credit union's decision.
What is the most I can have in my credit union savings?
Check with your local credit union as the maximum amount that each member can save does vary, but it is likely to be in the region of £5,000 - £10,000.
How quickly can I withdraw my savings?
In most cases it takes about a week to process a request for a withdrawal. However, credit unions which have a collection point in their main office may be able to process share withdrawals immediately, as long as 2 signatories are available. Your money is normally paid by cheque, though sometimes very small withdrawals may be made by cash. In all cases, the credit unions have an arrangement with a local Bank whereby all members can cash a credit union cheque immediately. If the cheque has a high value, the credit union needs to call the bank first to authorise it.
When can a child have access to their own money?
At the age nominated by the child’s parent or guardian.
Borrowing from a credit union:
How long do I have to be a member before I can apply for a loan?
This varies between credit unions, but it is likely you would need to save regularly for between 6 and 13 weeks to be eligible to apply for a credit union Loyalty Loan. Credit unions will often have different names for these savings-based loans, so check with your local credit union. Some credit unions have a contract to deliver loans to non-members, or members who have not yet saved with the credit union - these loans are processed within seven working days. Using the 'postcode search' on the London Money website will help you to find out which type of savings and loan products are offered by your local credit union.
How much can I borrow?
The amount you can borrow depends on the amount of money you have saved. Every credit union has a different policy so you need to check the details with your local credit union. As a general guide, the amount you can borrow for your first Loyalty loan is normally between from 1½ -3 times your savings. The rate of interest you pay may also depend on the amount you borrow. If you have no problem making the repayments and manage your loan account well, it is likely that second and subsequent loans can be 2, 3 or 4 times your savings balance (depending on your ability to repay). So, if you wish to borrow larger amounts in the future, it is important that you continue to save while repaying your loan.
As an example, if you are a new member and save £10 a week for 10 weeks, you will have saved £100. If your credit union has a policy to lend a maximum of 2 times your savings for your first Loyalty loan, the maximum amount you can borrow is £200. When you have paid this money back, you will be able to borrow more. If your credit union has a policy to lend a maximum of 3 times your savings on a second Loyalty loan and you have now got savings of £150 in your account, the maximum amount you could borrow for your second loan is £450.
What if I need a loan now?
If you need a loan quickly, some credit unions can give a loan to people who have not saved first with the credit union. This will generally be at a higher rate of interest than a savings-based Loyalty loan. Sometimes, credit unions call these 'Quick Loans', 'Handy Loans' or 'Instant Loans', but in reality it is likely to be about seven working days before the loan application is processed, approved and payment is made. If your local credit union doesn’t give loans to people who have not saved first, Fair Finance is likely to cover the area you live in.
What is the most I can borrow?
The credit unions all have varying loan policies with different maximum amounts. Contact your local credit union to talk through your options.
What about insurance for members – to protect loans etc?
Credit union members are usually eligible for free life cover. Credit unions are usually affiliated to an organisation which provides free Death Benefit cover for all members, subject to a set maximum age limit.
What is the interest rate on loans?
The law currently states that the credit unions cannot charge more than 2% per month or 26.8% APR. Most credit unions charge a lot less than this for savings-based Loyalty loans, usually around 1% each month or 12.68% APR . Each credit union has their own loan policy and members agree their own rate of interest. Credit unions charge “simple interest”, which means that interest is only charged on the outstanding balance. So, the more you pay off your loan, the less interest you will be charged. Unlike other financial institutions, there are no penalties for early settlement (i.e. paying off your loan in full, more quickly than expected).
Fair Finance Loans
What is Fair Finance?
Fair Finance is a social business based in London. They offer a range of financial products and services designed to meet the needs of people who are financially excluded. Fair Finance aims to revolutionize personal finance, starting with the people whom the mainstream providers have left behind.
Who can apply for a Fair Finance loan?
Anyone who lives or works in London can apply for a Fair Finance personal loan.
How safe is my money?
Are credit unions supervised like banks?
Credit unions are regulated by the Financial Services Authority (FSA) so operate to all the same high standards as all other financial institutions.
Important information about compensation arrangements
Credit Unions are covered by the Financial Services Compensation Scheme (FSCS). The FSCS can pay compensation to depositors if a credit union is unable to meet its financial obligations. Most depositors – including most individuals and small businesses – are covered by the scheme.
In respect of deposits, an eligible depositor is entitled to claim up to £50,000. For joint accounts each account holder is treated as having a claim in respect of their share so, for a joint account held by two eligible depositors, the maximum amount that could be claimed would be £50,000 each (making a total of £100,000). The £50,000 limit relates to the combined amount in all the eligible depositor’s accounts with the credit union, including their share of any joint account, and not to each separate account.
For further information about the scheme (including the amounts covered and eligibility to claim) please ask at your local branch, refer to the FSCS website or call 0800 678 1100.
What happens if any money gets stolen?
By law, all credit unions must have bonding insurance. This covers all credit union property and cash against theft, fraud and vandalism – in fact any dishonest act.
About London Money
What is London Money?
London Money is a directory which can help people find safe savings accounts and low-cost loans from their local credit union. The directory can also signpost people to Fair Finance, as an alternative to borrowing money from a doorstep lender. The search results page gives a summary of the products and services available. London Money is also a single brand which is advertised and promoted across London, Kent and Essex to help raise awareness of credit unions and to help people understand the financial services and opportunities which are available locally.
What does London Money aim to do?
Overall, London Money aims to help strengthen the credit union sector in the London, Kent and Essex, to encourage a saving culture and raise awareness of the alternatives to high-cost credit from doorstep lenders, pawn brokers and pay-weekly stores. The London Money directory aims to make it as easy as possible for people to find out about (and join) their local credit union or to find out about Fair Finance. The directory website is also part of a wider 'London Money' project, which includes targeted promotional work, opportunities for credit unions to create and update their own websites, free training and collaborative working.
Who is involved in London Money?
London Money is a collaboration between all participating credit unions and CDFIs across the region and is well-supported by a wide range of partner organisations which are keen to support the credit union sector. Partners include, for example, Social Landlords, Toynbee Hall, a major High Street bank, Advice providers and many Financial Inclusion partnerships.
What do I do if I have a compliment, suggestion or complaint about London Money?
What do I do if I have a compliment, suggestion or complaint about one of the credit unions or CDFIs?
Please contact the credit union / CDFI directly - contact details can be found on their websites.
Will London Money share my details with anyone?
London Money will not store your postcode details or email address or share any other personal information with anyone unless you give permission.