Which Credit Union?
They’re loan cooperatives and provide community savings. Members own and manage their credit unions. They’re not operated on a for-profit basis.
The money saved by members gets used to fund loans. Compared to many other lenders, the interest rates are competitive. Credit unions work hard to lend responsibly. Despite this, some members can struggle to repay their loans.
Debts owed credit unions have no special status. They get included in any debt solution you enter.
If you enter an insolvency process, you cannot leave these debts out. Personal insolvency includes an IVA, bankruptcy, or a DRO. In Scotland it includes a protected trust deed. Your debt will get reduced by any savings held at the same union.
Debt management plans are not formal insolvency. This means that they might be more flexible. However, a credit union loan debt should still get included. Other creditors might object if you continue to repay it in full.
Some people get loan payments taken via their payroll. If you enter insolvency, your employer should stop these deductions. Direct payment must stop.
Debt management plans are more flexible. However, the best advice is to include all of your debt in a DMP.
IVAs and Scottish trust deeds are tough on credit unions. It can take them a long time to re-earn the money that gets written off. Because of this, they might object to an IVA or trust deed. This will not always prevent your debt solution from going ahead.
Bankruptcy and DROs don’t rely on creditor acceptance. They cannot stop these solutions from going ahead.
If you’re in financial difficulty, a lender must treat you fairly. This includes credit unions. This might mean accepting a reduced payment. It might mean stopping interest or other charges. A debt management plan involves making a reduced payment. Credit unions should accept fair debt management proposals.
We have agreed fair debt plans with credit unions. For debt management advice, please contact us.
You’re allowed to save during a debt management plan. This is a good idea. You can set aside money for less regular costs, for example car repairs.
Saving is important if your income varies. You can set aside cash in good months.
Credit unions can be excellent places to save. Opening an account may have long-term advantages. It could make affordable credit available in the future.
When your DMP payment stops, you’ll have more spare cash. It’s a good idea to save some of this money. You’ll have an emergency fund ready. This will help you avoid future debt problems.
Your credit rating may be poor for some time. A credit union might be a good solution. They might consider lending when high street banks will not.
Which Credit Union?
You cannot join any credit union. Some cover certain areas. Some cover certain professions.
To find out which you can join, visit findyourcreditunion.co.uk.
If you’re struggling with a credit union debt, please get in touch.
We’ll help you find a sensible solution. Our debt advisers are experienced and qualified. All advice is confidential.
Author: Andrew Graveson – Qualified Debt Adviser & Bright Oak’s Founder
Page Last Updated: 19/09/2019