If you’re thinking of getting a loan, your credit union might be a cheaper option than a bank.However, if you’re behind on loan repayments, you might be worried about telling them. Don’t be afraid to let your credit union know if you’re struggling to repay. They will try to work out a repayment plan that suits you.
What is acredit union?
Credit unions are community organisationsthat provideservices and loans for their members. Toopen an account,you need to have a ‘common bond’ with other members. This meansone of the following applies:
- Members live in the samearea
- Members work for the sameemployer
- Members arepart of the same association
Borrowingfrom acredit union
Youneed to be a member of a credit union before you can get a loan.In somecreditunions, as soon as you are a member,you can apply for a loan.Credit unions have different rules aboutloans,so you need tocheckwith your credit union about what rules apply to your loan.
By law,credit unionscan’tcharge more than 12.68%APRbut some will charge less than this, depending on the type of loan you get. Youarestillexpected to repay your loan as agreed.
What happens if I don’tpaybackacredit unionloan?
If you don’t repay a credit union loan, this will affectyour credit history. The credit union might:
- Use your savings to repay the loan (this is calledoffsettingyour savings)
- Cancel yourmembership
- Take you to court
- Follow up the debt with anyone who has guaranteed your loan.
What to do if you’re struggling with a credit union debt and no other debt
If you have a credit union debt, you should look atwhere your money is going andexplore ways of increasing or making the most of it so you can make a realistic offer torepay.
The easiest way to do this is tomakea budgetusing our free tooland negotiate thisdebtwith your credit union. Read more about increasing your income.
If it is clear from your budget planthat you cannot afford your repayments, contact your credit union as soon as possible to explain your situation and find out how they can work with you.Or you can ask for time while you work out atacklingdebt plan.
How your credit union can help
Your credit union must work with you to help you find a solution for your repayments. For example, they might offer to:
- Loweror pause your payments for awhile
- Offset your savings on the loan(use your savings to repaysome orall ofthe loan)
- Stop adding interest to the loan for a limitedtime
- Support you with a claim against insurance if you are critically ill and havecover
- Help you work out a plan to pay what youowe
Being open and honest about your circ*mstances will show them that you have missed your payments not because you are unwilling to make them, but because you are unable to.
How to approach your credit union
You can produce a financialstatementto sendtoyour creditor with a letter explaining your circ*mstances and making your offer officially.
Youcan adapt and use standard letter Bto send with your financial statement and step 5ofthe5 steps to tackling debtwill guide youthroughputting your plans into action.
Sending a financial statementis often an effective way of persuadingyour credit unionto accept reduced payments over a longerperiod of time. Be prepared to give your lendermore informationabout your situation, such as bank statements and payslips.
Don’t agree to pay more than you can realistically afford. Any offer you make should be based on what you have left over after paying your essential commitments such as housing, food, heat, light and so on.Read more about reasonable living expenses.
See our tips for:
- Contactingyourcreditors
- Your tackling debt journey
If your credit union does not accept your offer and you’re unhappy with the solution offered or you need help approaching your lender, contact MABS.
What to do if you are struggling with several debts
If you’re finding it hard to keep up with repayments on your credit union loan and other debts, you can read information about what to doif youare struggling with several debts.
Need some advice and support?
If youget stuck along the wayor just want some free and confidential advice and non-judgmental support contact MABS or read more about how MABS can help.
If you decide to contact MABS, it would be useful to note all your questions and have your most recent letters, emails or court documents from your creditors to hand and any credit agreements (contracts) if you can find them.
You can also arrange to emaileitheryour Full Financial Picture or Financial Statementfor aMABSAdviser to look at before your appointment if you wish. But even if you don’t have this information, still make the call and MABS will help.
