What is a Credit Union? What is the difference between a credit union and a bank? In this article we will take a look at what each of those are and how they affect you as a consumer. We will also look at the pros and cons of a Credit Union vs. a bank, and why you should consider one when considering applying for new credit.
What is a Credit Union? A Credit Union is a group of financial institutions, which pool resources to provide low interest loans to its members. The members of a credit union are allowed to pool resources and borrow from each other for the purpose of making loans to each other. These unions have been around since the early 70’s in America, but only gained traction as an actual business entity from the mid 90’s onwards. They are not-for-profit but have a board of directors who make decisions about what loans to allow and which loans to charge interest on. All loans made by a Credit Union are supervised by a governing body, who are elected or chosen by the members of the credit union.
What are the advantages of a credit union? One of the main advantages is that credit unions generally offer better interest rates than banks. This is because they are institutions that pool resources, instead of just lending money to individual clients. Because all loans made by the credit union are administered by the governing body, they can set their interest rates and terms quite stricter than a bank could.
However, there are drawbacks to a credit union as well. The biggest disadvantage is that you often will have to be a high income earner in order to join. Another drawback is that you must have a job. Many people view a credit union as a stepping stone to a bank, or as an institution that loans money to people with no other qualifications. A credit union can actually force members to use their services. If you wish to avoid having to deal with such issues, you should research the details of each institution before you decide to join one.
Besides these drawbacks, a credit union can be useful. If you need to purchase a home or car and have bad credit, then a credit union may be your best option. You can get loans at better interest rates than you would get from a bank, and the lending criteria may be less stringent. In addition, many credit unions will help you develop financial strategies that will help you avoid financial setbacks in the future. If you have trouble paying off loans, for example, then you may be referred to a counselor, who will help you develop a workable strategy to pay off your debt.
Does it make sense to become a member of a credit union? The answer is both “yes” and “no”. Although a credit union has some advantages over banks, they tend to charge higher fees and interest. Also, they do not provide a lot of services, like paying bills or collecting payroll. On the other hand, you do gain access to some valuable resources.
There are also some disadvantages to being a member of a credit union. Because a credit union is owned by its members, you do not have as much protection as you would if you went it alone. If there is a dispute about one of your transactions, for example, you may be forced to go to arbitration instead of taking your dispute to court. Credit unions also do not provide one-on-one credit counseling like banks do. If you run into a problem, then it is up to you to solve it with your own skills, without the help of a credit union.
So what is a credit union? In short, it is an institution in which a group of members pool their resources to buy or obtain loans and investments and then lend the money back to its members. It is similar to a bank, but instead of owning a physical property that you use to keep your money, you use your money from your membership savings to invest in properties or other projects. As you can see, it is not so much a bank as it is a money-lending agency and has various advantages over banks.
