A Credit Union is a profit sharing, democratically run financial co-operative which offers convenient savings and low interest loans to its members. The members own and manage their credit union themselves.

The three main aims of a Credit Union are:

• To encourage its members to save regularly.
• To provide loans to members at very low rates of interest.
• To provide members with help and support on managing their financial affairs (if required).

• It's an easy and convenient way to save and borrow.
• It offers very low cost loans.
• Insurance at no direct cost.
• It's a way to learn new skills.

Credit unions can provide a focal point for a community by bringing people together, to work alongside each other for their own benefit and the benefit of the community as a whole.

The members make regular savings, as little or as much as they wish. These savings then form a common pool of money from which loans are made to members. When members have been saving for a certain period of time (usually about 12 weeks) they can apply for a loan from the pool.

However, in cases of emergency, a credit union may reduce this period, with certain safeguards. Interest on the loan is usually charged at only 1% per month on the monthly reducing balance. 12.68% Annual Percentage Rate (APR). The interest charged on loans is the credit union's income.

The membership criteria of a credit union is called the ''Common Bond'' - something that applies to every member.

Credit Unions welcome everybody from within the Common Bond regardless of income, employment status or age.

How much do I have to save? However much you can afford. Getting into the habit of saving regularly is more important than how much.

Credit Unions pay a dividend rather than interest. What's the difference? The dividend is not guaranteed. A credit union will pay a dividend if it has a surplus after all running costs have been paid.

How soon and how much can I borrow from the Credit Union? Most credit unions expect you to save regularly for about 12 weeks before allowing a loan and any loan will be related to your savings in some way. Again, in cases of emergency, a credit union may reduce this period, with some safeguards. The amount you will be able to borrow will depend on how much you need, what you can afford to repay, and the credit union's policies.

Credit Unions are now authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).

Your business is private in the credit union because all members and Officers who have access to personal information must act in a confidential manner at all times.

There is a statutory requirement for credit unions to have Fidelity Bond Insurance, which insures against fraud and theft. They are also members of the The Financial Services Compensation Scheme which protects the interest of all members should the credit union fail.

The Association of British Credit Unions Ltd (ABCUL) (the representative body for Credit Unions) summarises Credit Unions as being able to provide:

• A solution based on self-help rather than state handouts.
• A community owned and community based solution.
• A social framework as well as a financial one.
• A means of ensuring that money is kept within the local community.
• A solution based on tried and tested structures both in this country and others, and where Unions have shown themselves to be popular and successful.

Credit Unions are also seen as addressing important issues about social exclusion and deprivation. ABCUL has summarised the ability of Credit Unions to help address financial exclusion in the following ways:

• They help people learn the value of making regular savings.
• Credit Unions use a pool of savings to provide a source of low cost credit. This is particularly valuable for those who have difficulty borrowing at affordable rates of interest from mainstream financial providers, who might otherwise turn to loan sharks.
• A number of Credit Unions offer a bill payment facility. This enables individuals without bank accounts to benefit from purchasing their utilities in the most cost effective manner.
• One of the objects of a Credit Union, set out in the 1979 Credit Unions Act, is the education of its members in the wise use of money. Credit Unions can play a valuable role in helping people to be effective and responsible users of financial services.