Credit unions are a fast-growing alternative to the traditional way of borrowing from banks and building societies and the more recent methods of borrowing from doorstep lenders and payday lenders.
Credit Unions are licensed by the Bank of England’s Prudential Regulatory Authority (PRA). They are covered by the Financial Services Compensation Scheme, which covers 100% of savings up to £85,000.
They are capped by law on the maximum rate of Annual Percentage Rate they can charge (42.58%) and are run on the principles of mutuality. They only work for the interests of their members, not external shareholders, which means surpluses are shared between members as a dividend – a lump sum added to members’ savings each year.
There are many credit unions in the UK, serving over a million members, and they offer savings accounts and loans to their members.