About Borrowing from a Credit Union

Credit unions are a type of co-operative which accepts deposits and offers loans to individuals in need of financial assistance. These options are generally established by people who have common interests surrounding where they live and work, and can offer low-interest lending, and sometimes even bank accounts. Credit unions have been around for many years, but over the last decade or so they have become increasingly popular with borrowers and savers alike.

The key features that can often be used to establish a credit union are:

– A company or organisation which is regulated through the Prudential Regulatory Authority and the Financial Conduct Authority, or FCA. The protection limit for consumers at this time is £75,000. If you have money that goes above this limit, your money may be at risk if your building society or bank fails.

– Credit unions can be large or small. Some are very limited whereas others have been known to have literally thousands of members at any given time.

– Credit unions are run through a “not for profit” basis. This means that instead of paying shareholders a profit, they use their money to help reward their members and ensure that their services remain to be competitive.

– People who save or borrow through credit unions generally need to have a common bond. This means that you might have to live in the same area, have the same profession, or work for the same employer. Credit unions can also be made up of people that are part of the same trade union or church.

Why Consider a Credit Union?

There are a number of benefits when it comes to borrowing from a credit union. Most credit unions operate with three significant aims in mind. They want to encourage all of their members to engage in regular saving, provide loans to people at low rates, and assist members who feel that they need financial assistance or advice.

Credit unions are designed to act in the interests of all the members involved, so they try to make sure that they do not allow their members to take out any loans that they would not reasonably be able to pay back. This means that a credit union will often need to evaluate your finances and assess your income before they will offer you a loan opportunity. There is also a cap on the amount of interest that a credit union can charge on their loans. Credit unions can only ask for interest levels of 42.6% per year or 3% interest per month.

How Do Credit Union Loans Work?

The money that is held by a credit union in current accounts and savings can be lent out to other members who need to borrow money at affordable rates. In the United Kingdom, a credit union will be monitored and regulated by the Prudential regulatory authority and the financial conduct authority.

In most cases, you will need to be established as a member of a credit union before you will be able to access a loan from them. In some situations, your credit union may also require that you build up a certain level of savings too. Most unions will charge you an interest level at an average of 1% per month until your loan is paid off, and some charge even less. There are no hidden charges involved with credit unions, and as with any lenders, you will simply be expected to repay your loan exactly as you agreed to do so.

Credit unions can also offer free life insurance at no extra cost, so that if you die before you repay the full loan, the balance will be paid on your behalf.

Most credit unions will be willing to offer loan periods that extend up to a maximum of five years with unsecured loans, and ten years through secured loans. In secured loans, however you will need to put up an asset as security in case you cannot make repayments. However, certain credit unions have been known to lend for up to 25 years on a secured basis. You will need to speak to your local credit union to find out more about their conditions.

Paying Back your Loan

There are a range of ways in which you can pay back your credit union loan. For example, you could simply make direct debit payments from your account, or give a portion of your wages at work to the money you owe. In these circumstances your employer will need to have links to the credit union that you are borrowing from. You should also find that some credit unions are willing to let you make repayments from direct payments through your benefits.

When you are finding out the details associated with lending from credit unions you should discover how they expect you to pay back the money owed.

Do You Need to Get a Loan?

Before you simply decide to sign up for a new credit card, loan, or store card, or add more debt to an existing loan that you might already have, it’s crucial to think carefully about your financial circumstances. Many people jump into loans without actually asking themselves whether they really need to borrow money. Unfortunately, in the time that we are in, with issues such as rising economic uncertainty and financial problems, many people would prefer to pay back the money that they have already borrowed instead of attempting to borrow more.
There are a number of very important questions that you should always ask yourself before you start borrowing money. For instance, ask yourself whether you really need to spend the money, and whether you have other ways of financing your purchase.

Do You Really Need to Borrow Money?

Some people who choose to borrow money do so without thinking about whether they can afford it, because they simply feel that they have no choice. However, often this is not the case. It may be that you could not make the purchase you are considering, or put it off to a time when it will be more affordable. Try asking yourself whether you could wait until you can actually afford to buy the item before you try borrowing, and if there’s something you need, whether you can get it using a different strategy.

Often the best solution is to think about how you can save back money over time to make sure that you end up with the cash you need to make important purchases. For example, if you don’t need to make an emergency purchase on a single day, then you can consider saving some of the money that you make each month, rather than running the risk of getting into debt.

For instance, if you can wait and save for the purchase that you want to make instead of using a loan or a credit card, then the ultimate purchase will actually cost you a lot less in the long run, as you will not be required to pay back any interest.

Alternatively, if you absolutely need the money to make a purchase immediately, then you might be able to ask a friend or relative to let you borrow the money – as they often won’t ask you to pay any interest on the amount that you need. Crucially, if you look at your finances and think that you definitely will not be able to save up any money over the months ahead, then you probably shouldn’t be considering a loan or credit card anyway, as you would not have the funds required to pay back the amount you owe, and may therefore end up putting yourself in a serious amount of debt.

If you Decide to Borrow Money

If after a careful consideration of your circumstances you decide that you do need to use a loan or a credit card to get the items or service that you need, you will need to consider a number of important factors. For example, you will need to think about whether you can actually repay the money that you are borrowing, and how much you can afford to repay.

It’s crucial to determine exactly how much you can afford to dedicate to loan repayments each month before you consider taking out a loan. Doing this will help you to figure out which option for borrowing is best for your needs. Make sure that you think carefully about how much you will be able to pay if you were suddenly hit by an emergency or your rent went up for some reason.

Once you have considered your ability to make repayments, then you will need to make sure that you select the right type of loan or credit card for your specific circumstances. After all, if you choose the wrong credit solution then you could end up paying more in interest and other charges than you actually need to. Make sure that you talk to an expert if you can, and shop around for different deals, examining the available APR and interest that you can access on the market, and the cost per month or week that you will need to pay. It’s also worth looking at the amount you will have to repay altogether, and whether there will be any penalties for late and missed payments.

While you’re taking these considerations into account, remind yourself that not all credit options on the market today are safe or good. Indeed, if you have a bad credit rating then you might be tempted to use a loan company that charges you a huge amount of interest just so that you can get access to cash – however, this can put you in a significant amount of danger in the future if you simply cannot afford to make the repayments that you take on for yourself.

Understanding Second Charge Mortgages

A second charge mortgage might frequently be referred to as simply a second mortgage because they have a priority that comes behind your first mortgage. These options are a form of secured loan, which means that your home is offered to the lender as a form of security. Many people use second charge mortgages to help them raise money when they don’t want to re-mortgage. However, as with most kinds of loans, there are a range of things you will need to think about before you apply for a second charge mortgage.

How Second Charge Mortgages Work

If you’re wondering whether you can get a second mortgage, the first thing to know is that you will only be able to get one if you are already a homeowner. However, that doesn’t mean that you necessarily need to live in the property to get a second mortgage. You can borrow a varied amount from a second charge mortgage by using the equity in your home as security against another loan. In other words you’ll end up with two mortgages on one property.

Equity is simply the percentage of the property that is already owned by you – which is generally the value of the home in total minus the amount of the mortgage that is already owed on it. For instance, if you buy a home that’s worth £250,000 and you’ve already payed £100,000, then you will have £100,000 equity. This means that the equity left will be the maximum amount you can borrow.

Today’s lenders must comply with stricter rules governing mortgage advance and dealing with payment difficulties. In other words, your lenders will need to make the same affordability checks that apply for a first or main mortgage. You will need to show your mortgage provider that you can afford to pay back the money that you are borrowing.

Benefits and Negatives of Taking out a Second Mortgage

Although it means that you’re going to be in more debt, there are many reasons why people might consider taking out a second charge mortgage. For example, if your credit rating has been reduced since you took out your first mortgage, deciding to re-mortgage could mean that you have to pay more interest overall on your full mortgage payments. If your mortgage has a high early repayment charge, then it could be cheaper to take out a second mortgage, rather than re-mortgaging. If you are struggling to get hold of some unsecured borrowing options, then you might need to consider a second mortgage.

On the other hand, just as there are certain reasons that might prompt you to take out a second mortgage, there are also circumstances when a second mortgage may not be appropriate from your needs. Remember that taking out a loan this big is a huge decision and you should weigh up the pros and cons carefully. For instance, if you are only barely managing to repay the mortgage that you currently have, then you should probably avoid committing to a second mortgage, as you could lose your home if you cannot make repayments. Similarly, you should never use a second mortgage to consolidate debts, as you may end up paying a great deal more interest. What’s more, you may be converting unsecured credit into secured credit which is more dangerous.

Before Taking Out a Second Mortgage

Before you take out a second charge mortgage, you may want to get some advice from an individual with the correct qualifications. These people will be able to help you find a loan that is best for your specific needs and situation. If you choose not to get any formal advice, then you may end up obtaining a loan that simply isn’t right for you. If this happens, then you might struggle to get help when you cannot make the repayments. #
Make sure that when you look into a second charge mortgage, you speak to your existing lender about what they might charge for another loan, and shop around for better deals. You should also find out the exact terms of the new mortgage, as well as early repayment charges, fees, and more.

The Alternatives and Risks

As with most loans, it’s important to remember that there is almost always an alternative solution available if it terms out that a second charge mortgage is not the right option for your specific needs. Remember that because a second charge mortgage works in the same way to your original mortgage, you will be placing your home at risk if you cannot keep up with the repayments.

If you decide to sell your home, then your first charge mortgage will be cleared in full before any of the money that you receive can go towards paying the second charge, because the first has priority. However, your second charge lender will still be able to pursue you for the money that they are owed which they have not yet received.