There is a third force in savings and loans that many people do not know about and even fewer use.

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Yet the rates for savings can compare with the best offered by banks and building societies and the interest on loans can be among the cheapest there is – especially for borrowing small amounts short-term, a service that banks don’t offer.

Credit unions – community based financial coops – have a long history.

The 429 in the UK (as in 2018), ranging from small, old fashioned organisations to larger businesses that could as easily be building societies, look after almost £1.4 billion of savings and have lent £1.5 billion to their members.

One reason they’re not better known is that they don’t have big budgets to advertise.

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Another is that they come with restrictions. To save or borrow with a credit union, you need to show what is called a “common bond” with it. That can mean where you live or work, what your job is, or a society you belong to. Almost everyone can find a credit union to join, but not all offer great rates.

In the past, credit unions used to insist that members saved with them for a while before they could borrow. But nowadays many will lend first and invite you either to start saving later or to save a small amount on top of your repayments.

However, very few will offer same day credit.

Payday loans can cost up to 1,260% APR – but they will give you a decision at once and pay the money within the hour.

Credit Unions take longer than that – some a lot longer – but will always be much cheaper. They can charge a maximum of 42.6% APR for smaller loans (and less, often a lot less, for other loans).

Even at 42.6%, this is often the best way to borrow small amounts short-term. For example, if you borrow £500 over six months, it can cost you just £555.

Savings rates with some credit unions are guaranteed and as good as they get, but others pay a dividend depending on their profits, so can be nothing.

Savings are protected up to £85,000 if the credit union goes bust.

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You can find a credit union to join at findyourcreditunion.co.uk

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