Various changes to financial systems all over the world have made it easier for individuals to get access to finance. Many people opt for getting various loan types from mainstream lending institutions like banks. In recent years the micro lending sector has experienced a surge in the number of people choosing this type of finance. While these types of lending institutions are popular, there are other options available too.
One of these options is a credit union.
What are credit unions and how do they work?
Credit unions are member-owned financial cooperatives that are democratically controlled by members. They are operated for the purpose of providing credit at competitive rates as well as providing other financial services to their members.
They can essentially be regarded as not-for-profit organisations that exist to serve their members.
Those who have accounts in the credit union are its members and owners and they elect their board of directors in a one-person-one-vote system regardless of their amount invested.
Credit unions offer individuals simple and alternate solutions to their financial needs. These cooperatives provide an easy and safe way for individuals to borrow funds without the pressure of high interest rates.
Why choose credit unions?
Credit unions provide a safe place to save and borrow at reasonable rates. These financial cooperatives operate to promote the wellbeing of the members.
Profits are returned back to members in the form of reduced fees, higher savings rates and lower loan rates. In this way, one member’s savings becomes another member’s loan.
Members of credit unions often have shared interests.
Their purpose is to serve their members rather than to maximise profits.
Credit unions offer other services, such as cheque accounts, also known as shore draft accounts. There are usually no service fees or minimum balances.