Borrowing from a credit union

A credit union is run by members to benefit communities, rather than to make a profit. 

This means it helps people access banking products like bank accounts, savings and loans – even if they’ve been rejected by a bank or building society. 

Find out more in our guides:

• Credit union bank accounts

• Credit union saving accounts

To join a credit union, you must share a ‘common bond’ with other members. For example: 

• living, working, studying or volunteering in a certain area 

• working in the same industry or for certain employers

• belonging to the same church or trade union.

You might also need to pay a small fee or deposit money into a savings account. 

Credit unions use members’ money in savings accounts to give loans to other members. 

They often offer a range of loan products, from small loans (around £500) to larger ones (up to £5,000 or more).

You can usually choose to repay within six months or up to five years. Part of your loan repayment might even go into a savings account, so you’ll have a pot of money to use at the end. 

To qualify for a loan, you might need to:

• be a credit union member for a certain period

• have some money in its savings accounts.

You usually won’t need to pass a credit check. 

Credit unions typically have higher loan interest rates than banks or building societies. But they’re usually much cheaper than high-cost options like payday or short-term loans. 

Credit unions also have a maximum interest rate they can charge:

• 42.6% APR (3% a month) in England, Scotland and Wales

• 12.68% APR (1% a month) in Northern Ireland. 

There are usually no other fees or penalties and you can repay the loan early. 

Like any type of borrowing, you’ll need to make sure you can afford the repayments – and be able to repay on time each month. 

Setting up a Direct Debit with your credit union is the easiest way to make payments automatically. 

You can also usually make payments:

• in person at a credit union branch or shop with Paypoint

• directly from your wages before you’re paid. 

If you’re worried you’ll miss a payment, always speak to the credit union and ask for help.

See Talking to your creditor for more information.

Before applying for a credit union loan, compare all your borrowing options first. 

Use our Your options for borrowing money tool to see the available products and their pros and cons.

If a credit union loan is right for you, follow these steps:

Look for credit unions near you on these websites. Remember to check if you meet the criteria to join and what you’ll need to do to get a loan.

Apply to be a member online, over the phone, or in person. You might have to wait a few days for your application to be processed.

Once you’re a member, you might need to start saving or wait before you’ll be able to apply for a loan. Some credit unions let you apply straight away, so check with them directly.

Community Development Finance Institutions (CDFIs) offer help and guidance with borrowing money, including budgeting, saving and claiming benefits.

They might also offer personal loans and ensure you can afford repayments before lending. 

Loans typically range from £100 to £1,500 and can usually be repaid early with no penalty. 

They might also help you buy a specific item, like household appliances.

Interest rates are typically 40% to 350% and there might be an admin fee to get a loan.

This means community lender loans can be more expensive than those from:

• credit unions

• banks, or  

• building societies.

But cheaper than:

• payday loans

• doorstep lenders, and 

• renting household items. 

To compare options, see Finding FinanceOpens in a new window

If the community lender can’t offer you a loan, they will usually explain why and help you to improve your finances.  

If you take a loan and later think you’ll miss a payment, always ask the community lender for support, such as a new repayment plan.

For more information, see Talking to your creditor.