Credit unions are community run financial services that help you save money and on occasion provide loans from a few hundred pounds to potentially a mortgage. While credit unions are considered an alternative to high-cost credit, you have to be a member in order to access the benefits and not everyone is eligible. However, there are other alternatives to high-cost credit and credit unions that are available to people with a bad credit history.
A credit union is run by its members for its members. There are no shareholders and all of the money raised is put back into running the service and is shared among its members in the form of dividends. If you are eligible and you struggle with money, a credit union can help you manage your finances and work out a realistic and attainable budget to help you save and protect yourself against potential financial vulnerability.
While they are great for their members, not everyone is eligible to be part of a credit union. They are often run with a commonality such as location or profession. So, if there isn’t one in your area or your industry you might not be able to join one. Plus, credit unions tend to have limited resources which mean they can’t process loan requests very quickly and, for some people, this delay might mean arrears or missed priority payments.
A credit line is a revolving credit product. It’s not a community based banking service, but at Polar Credit, we do value our customers and commit to making lending more sustainable for our borrowers.
First you apply for a credit line and, if approved, your account becomes active. When you need a bit of cash, you simply withdraw the money from your credit line via your online account and the funds are deposited into your bank account within minutes. You must make at least your minimum payment each month, but otherwise the repayments are entirely flexible depending on your specific financial circumstances. Of course, only making your minimum payments each month will mean it takes you longer to repay your balance, so we would also suggest repaying your balance in full, but on the odd occasion that repaying your full balance is unaffordable, a minimum payment allows you to be in control of your finances.
A credit line means having access to credit on an ongoing basis, without having to submit an application each time you need to borrow. In this way, when an unexpected payment comes up or maybe an annual bill you’d forgotten about comes through the letterbox, you can use your credit line to maintain your cashflow. Additionally, if you can’t afford to repay the credit line balance in full one month, then you can make a minimum payment, and we will review your credit line periodically to see if you are eligible for a credit limit increase (or decrease).
The representative APR on a Polar Credit line is 68.7% APR (variable) which is much lower than high-cost-short-term-credit options and as we actively try to reduce the cost of your borrowing, your interest rate will decrease over your borrowing lifetime. This means you can manage your finances effectively and be rewarded for borrowing responsibly.
A credit union and a credit line are very different products so without knowing your specific circumstances or why you need to borrow money from time to time, it would be difficult (if not impossible) to advise on the best option out of the two.
A credit union can help educate you about your finances and advise you on responsible borrowing decisions. It can support you with a loan on occasion and you’ll earn a dividend just for saving money with them. A credit line on the other hand is simply a financial product to help manage your cashflow. There’s no reason you can’t be part of a credit union and have a credit line as long as you are not borrowing more than you can afford from either.
We have loads of informative articles all about managing your finances and different financial products over on our Info Hub.