Credit Unions are nonprofit financial institutions whose main goal is to help out its members manage their financial savings and at the same time help them from any financial crisis through low interest personal loan. Credit Unions are forms of cooperative or community organizations managed and operated by its members.
Characteristics of a Credit Union
Only members who have common bonds can create and be members of a credit union. These members are the only ones who can get access to its financial services. Common bond mean that the members all live on the same residential area; work for the same company or belongs to the same trade union; are members of the same religious sect or belongs to the same professional organization. Credit unions are not out to make a profit but the little money they make is to help out members with their savings and financial difficulties. Credit unions can be large or small. Their members vary from hundreds to thousands depending on their financial service capability. Like any other financial institutions, they are bound by financial laws and regulations mandated by both the local and federal government. Their only difference from the traditional financial institutions is that they are only allowed to serve the members of the union. Its main objectives are to provide the members low interest loan, encourage them to regularly deposit money on their savings, and to manage the same efficiently. These goals aim to show that credit union only works for the interest of their members. They act as money lender to their members but they also protect them from being in a bad debt situation. The loans that they give out have interest caps, meaning that they can only go as high as a specific interest rate and it is usually way below the normal rate given out by traditional banks.
Paying off the Loan
Paying off loans from credit unions can be done by paying directly at their office; by debiting the amount from the member’s savings; through salary deductions; and through accredited payment centers.