How & Why Credit Unions Work

Credit unions are community-based savings and loan cooperatives.

Members pool their savings to lend at affordable rates to each other, as and when required, and importantly to save their money and earn interest on their savings.

Any interest earned on savings is normally paid annually and is called a "dividend". The amount of any dividend depends on the profit (if any) made by the credit union over the year.

The advantage of credit unions is that they are run by members, for members. 


Joining a Credit Union
To apply to join a credit union you usually need what is described as a "common bond". This would normally be one of the following:

  • You work or live in the same area as other members.
  • You work for the same employer.
  • You belong to the same group or association, for example, a trade union, church or community organisation.

Belonging to a group or union is a key way that credit unions are growing, particularly in the UK. The Unite union is forming (or joining existing) credit unions throughout the UK, to offer union members an alternative source of loans and places to save.


Loan Rates
Credit unions offer competitive loan rates, (a maximum 2% a month on the reducing balance or 26.8% APR). So for example, a £500 loan repaid over six months would cost you no more than £36 in interest and could cost you much less. This is a much better rate than that charged by doorstep lenders or payday loan companies.

The amount loaned can vary between credit unions, for example, some may lend up to £1,000, others may offer mortgages, and so lend a lot more.


Not Just Loans
Credit unions can offer a range of financial products, not just loans:

  • ISAs
  • funeral plans
  • mortgages
  • current accounts with debit cards
  • budgeting
  • debt advice
  • insurance - house, motor etc.
  • free life or loan protection insurance

Is My Money Safe?
Yes, credit unions are protected under the same scheme as banks and building societies - the Financial Services Compensation Scheme. Under the scheme deposits in banks, building societies and credit unions are covered up to £85,000 per person. So if you have £85,000 or less in an account, you would receive the entire amount back if the bank, building society or credit union holding your money went bust.


UK Credit Unions
Credit unions in the UK have been growing steadily over the past ten years, and are continuing to grow as people look for more affordable loans.


Credit Union Figures

  • Approximately 405 credit unions across England, Scotland and Wales
  • More than 1 million people use credit unions
  • £762m is saved in credit unions in the UK
  • £604m is out on loan to members of credit unions
  • 25 credit unions across the UK now offer current accounts
  • More than 34,000 people have their current account with a credit union
  • Some credit unions offer mortgages, cash ISAs and insurance products

Growth Figures
These are the growth figures for credit unions between 1997 - 2007:

  • 170% increase in membership
  • 318% increase in savings
  • 298% increase in loans
  • 351% increase in assets

Global Credit Union Figures
The credit union movement is a global movement:

  • 51,000 credit unions in 100 countries
  • 196 million credit union members across the world
  • US$1.5 trillion in assets
  • 25% - 50% of the populations of the USA, Canada, Australia and Ireland are members

Find Your Local Credit Union
To find your local credit union, please go to