You may have read in the papers and online that repayments for a number of different high cost loans have been frozen. While this may help in the short term, it isn’t as good as it sounds, as you will still have to repay the loan – often at extortionate rates of interest.
There has been a flurry of stories in the news about people with payday loans, rent-to-own and buy-now-pay-later deals being able to benefit from a freeze on repayments. This is of course very helpful for people experiencing money problems because of coronavirus, but the loans will have to be paid eventually – at high rates of interest.
So, now might be a good time to consider a credit union loan. Our loans are a much fairer and more affordable alternative, which will not only help you manage your finances better during the coronavirus crisis, but will provide you with a useful long-term solution to your money needs.
One of our low cost ‘Saver Loans’ for example, will see part of your regular loan repayments allocated to a savings pot, which means that as you repay your loan, you will start to build up savings for a rainy day.
You can apply for a Saver Loan as soon as you join the Credit Union, but existing members who have saved with us first can benefit from even lower rates of interest and higher borrowing limits.
The maximum value for our Saver Loans is currently £20,000 above the value of your savings, but lower limits normally apply for first time borrowers. Interest on most ‘Saver Loans’ is charged at a fixed typical rate of 12.7% APR, but rates may vary dependent on our lending risk criteria.
When your low cost loan is approved and, if you are not already a member, you must open your account with a minimum £50 deposit to your savings account.
Our Saver Loan sees part of your regular repayments allocated to your savings account which means that as you repay your loan your savings continue to grow. You can then access your savings once the loan is repaid. This Saver Loan principle means that you gradually reduce and ultimately eliminate your need to borrow.
The credit union Saver Loan is a very low cost way of borrowing. For example, £1,500 repaid monthly over a year at our typical rate of 12.7% APR, would mean 12 monthly repayments of £134, with typical total interest paid of £100 over the year.
Borrowers must continue to save not less than £28 per calendar month throughout the repayment term of the loan, which would leave savings of at least £336 at the end of the period.
Credit Union Chief Executive Martin Groombridge said: “We recognise what a difficult time this is for everyone, and we welcome any measures that help people with their loan repayments. However, we know from the dozens of people who come to us each week, just how costly payday loans and rent-to-own can turn out to be. That’s why we’re recommending one of our low cost loans as a much more sensible alternative.”
Click here to find out more about our range of low cost loans.