A Guide to Credit Unions for People with Bad Credit
Banking doesn’t have to begin and end with banks
Banks have received a lot of negative press over the last few years, with bankers receiving copious bonuses while the average person struggles to pay their bills or bear the brunt of massive banking charges.
If you have bad credit, banks are less likely to extend a warm welcome to your business and even less likely to approve requests for overdrafts, loans or credit. If you are looking for an alternative to traditional banks and you have poor credit, you should consider a credit union.
What is different about a credit union versus a bank?
A credit union is different from a bank because it is a non-profit organization. A credit union provides the same services as a bank such as:
- Checking account services
- Savings accounts
- Mortgage lending options
- Low-cost auto loans and car financing
- Personal lending
What happens to the profits of a credit union?
As a credit union is not underpinned by shareholders, its profits can be returned to its members via lower fees and improved services, such as more accessible lending possibilities and a wider pool of loan funds. The lack of shareholder control also means that it is often possible to make more interest and pay less service fees with a credit union rather than a bank.
What are other benefits of using credit union?
- Credit unions do not carry out credit checks or discriminate against members according to their rating or history, making them viable for those with poor credit.
- They are altogether more egalitarian organizations that often have a focus on community development.
- The localized aspect of credit unions makes them appealing to people who want to invest with, save with or borrow from an organization with a vested neighborhood interest.
- They are more accountable than banks, which are often much more impersonal and charge extortionate fees without explanation.
- Credit union fees are usually much lower as they do not charge “opportunity profits” like banks.
More options for financial health
Credit unions tend to offer more options than banks. Overdrafts and loans are standard options that are available, but there will also be other “back up” options to help consumers to avoid falling into debt or receiving charges for being overdraft. For example, if you have more than one account, you may be offered the chance to transfer some of the balance from one to another if the balance is going into debit.
Fee structures with a focus on paying less, not more
Credit union fee structures are usually built with a focus on minimizing the amount a consumer is charged. This is in stark contrast to banks, which apply automatic charges systematically with no maximum limit.
How can I find a local credit union?
You can go to the Credit Union National Association website to find a local credit union in the U.S., learn about its performance and see what lending options are available to people with bad credit. There are a total of 5,500 credit unions in the U.S, with the site being updated regularly with new additions.
Download this infographic.