Debt in the UK has hit a record high. Again. And it is expected to climb forever further. Is there any reasonable way out of this debt? Quick Loans Express explores the frightening reality of everyday debt in the UK and whether credit unions will fill the debt gap.
Are Credit Unions the Answer to Debt?
As a country, we are in deep debt and severe change is needed to get a grip of this all-consuming gloom. The amount of debt we are in is staggering and it is hard to see a way out as wages are overtaking expenses more than ever. Take a look at this carousel to see the clear-cut figures of debt and how it impacts the individual.
Are We Living Beyond Our Means?
In the good old days and borrowing money was limited to the few street lenders, people didn’t borrow. They were used to finding conventional ways to save money for the things they needed most, like a house. They would scrimp and save, make do and mend and often just did without. It is very different to the way most of us live our lives nowadays where admittedly it is much harder to get on to the property ladder and the norms have changed. Perhaps, however, we could take a lesson from our sensible ancestors and learn to take a step back before purchasing items and experiences we want in our lives.
We also need to learn to save money if we can. According to the Money Advice Service, 21 million adults – more than half of UK adults have less than £500 in savings. This is an increase of 340,000 from the previous year. Because of people’s fragile financial situation, if they hit the slightest emergency, they have no choice but to turn to borrowing credit. Interest rates are high. Vulnerable borrowers can fall into loan shark’s mouths. And the cycle of debt begins.
The Use of Credit Unions to Stop Debt Escalating
There is no use going back to the same old arguments. However, money is entirely different in today’s’ age. We must learn to live with it, save and stop debt dragging our nation into disrepair. As one top financial regulator put it: “There are a significant number of households that are in so deep that the slightest sign of rough weather could see them in over their heads.”
The future and the past too are credit unions. There has never been a better time for people to start considering becoming a member of a credit union seriously. The Bradford District Credit Union (BDCU) this week celebrated a £100,000 grant from Lloyds Banking Group to expand its services.
What is a Credit Union?
Unlike payday loan companies, a credit union is a financial society owned and run by its members and not by external shareholders or investors. It is run as a non-profit organisation. Like short term loans, however, the FCA (Financial Conduct Authority) regulates credit unions, so lending is fair and safe.
Credit Union Loans
Credit unions are designed for members to save and borrow with low-interest rates. Members are encouraged to save small amounts regularly, usually £3 a week – £1 for the unemployed. In the event of members needing to borrow from the credit union, they can lend between £200 and £7,500. However, member’s income and expenditure are scrutinised to check their affordability.
It is worth putting your money in a credit union or being a member should you need financial assistance. It is one of the cheapest options for gaining credit, and it encourages you to save money too. At the end of the year, the credit union gives its members any surplus in the form of a dividend.
How To Become a Credit Union Member
To become a member of a credit union, there must be a ‘common bond’. This means:
- People working together
- Living in the same place geographically,
- Belong to the same church or community, etc.
Are Credit Unions Popular?
Popularity for credit unions is growing. The first credit union started in Germany in the 1800’s and the first in Britain was set up in 1964. The movement has expanded to lending and saving services for up to 1.3 million people in the UK. However, compared with the number of people borrowing money, this is not one of the most popular options. Limited member availability and lack of credit union education could be the cause of this. The number of credit unions must increase dramatically to drive away a £5 billion estimated income for loan sharks.
Furthermore, despite credit union membership growth, there also some credit unions failing. Lucie Russell, campaign director at Fair By Design, associates the failings with poor digital services. Most lenders offering little loans for bad credit or quick payday loans have streamlined the application process making it more accessible and easy to apply. Credit unions unfortunately have not kept up with this digital pace and are therefore not as popular as they could be.
There is government support for credit unions. The government are willing to invest in the credit unions to make them better and more accessible for people. They recently just invested £38 million for modernising and expanding credit unions. Furthermore, any money recovered from illegal lenders or loan sharks will be allocated to encourage vulnerable people to join credit unions in the future. The economic secretary to the Treasury, John Glen MP, wants to expand the numbers of potential common bond members by almost 1 million by introducing new legislation.
With household debt on the rise and options of credit very limited, all that remains is to see whether credit unions will ever fill the gap of staggering household debt. As an honest and ethical same day loans direct lender, we would encourage all potential borrowers to consider using a credit union. It promotes saving with rewards, and it allows you to borrow with low-interest rates. However, if you are not part of a credit union and you are stuck for cash, that’s where we come in. You can borrow short term loans at competitive prices.