How does My Community Finance work?
We connect you with two major credit unions providing affordable loans: My Community Bank and Castle Community Bank. My Community Finance is a broker, not a lender, which means we don’t provide loans directly - instead these are issued by our partner credit unions.
What’s a credit union?
People who have lower credit ratings (known as ‘poor’ or ‘fair’) typically find it more difficult to borrow money from traditional high street banks and building societies at reasonable rates.
Credit unions were initially set up to help improve the financial health of their members and the community by offering an alternative solution to borrowing for people historically exploited by payday and doorstep lenders, who charged extortionate rates of interest.
These days credit unions are accessible to thousands of people wanting to choose an ethical approach to help achieve their financial goals.
Credit unions are not-for-profit organisations, where any profit made from lending is returned to its members through better interest rates or reinvested back into the credit union so it can improve its services and reach more people.
To be able to borrow money from a credit union, you’ll need to become a member. The criteria for membership varies - the credit unions My Community Finance work with accept almost all fields of employment, as well as membership of organisations like the Co-Op and National Trust.
When you apply for a loan with us, we’ll match you with a credit union that suits your circumstances.
What’s the difference between a personal loan and a credit union loan?
A personal loan from a traditional lender is more or less the same as one from a credit union - however, the main difference is that credit unions do not profit from lending you money.
The main goal of a credit union is to provide its members with more competitive interest rates on borrowing and saving. Interest charged to customers who borrow money is used to pay interest to customers who save with the credit union, as well as covering the credit union’s own costs for providing these services.
What can I use a loan for?
You can use the money to spread the cost of large purchases, such as a new car, paying for significant life events like a wedding or dream holiday, or making improvements to your home.
You can also use a loan from a credit union to get your finances back on track by consolidating existing debts or paying off expensive credit cards or overdrafts so you pay just one fixed monthly repayment, helping you to budget.
Who can apply for a loan?
To be eligible for a loan with one of our credit unions, you’ll need to:
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Be between the ages of 21 and 65
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Live in the UK (excluding Northern Ireland, the Channel Islands and the Isle of Man)
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Be employed and earn at least £18,000 a year
How do I apply for a loan?
You can apply for a loan with one of our credit unions using our online application form. The process is straightforward, and we’ve listed the journey you’ll go on below:
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You’ll share more details about yourself and tell us how much you want to borrow and for how long.
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We’ll use this information to perform a soft credit check (we use TransUnion and Experian) - but don’t worry; this won’t affect your credit score, and other lenders won’t be able to see a record of it on your credit report.
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We’ll pass your information on to the credit union we’ll match you with and they’ll check your affordability and check your credit score.
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If you pass the eligibility criteria of the credit union, we’ll give you a personalised quote, providing you with how much APR the credit union will charge you for borrowing the money. (Your quote will be valid for 30 days).
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If you haven’t signed the loan agreement within 30 days, you’ll have to reapply and get a new quote, and it’s worth noting that the APR may not be the same as your previous quote.
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If you’re happy with your quote, you’ll need to sign your loan agreement, and at this point, we’ll perform a hard credit check on your credit report, which can be seen by other lenders or any organisation with access to your credit report.
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You’ll get access to our customer portal, where you can keep track of your application. There may be occasions when we need to ask you for more information, which can be provided via the portal.
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The credit union will aim to make a decision about whether or not they can lend you the money within two working days. If you’re happy to proceed, you should receive your money within three to four working days of your application.
What is interest, and how much will I pay?
Interest is what you pay for being able to borrow money - it’s a fee you pay alongside your monthly repayment. How much interest you pay will vary depending on several factors, but the most important thing to remember is that the more interest you pay, the more expensive your loan will be.
What’s APR?
APR stands for Annual Percentage Rate, which indicates the cost of borrowing over an entire year, including interest and fees. The credit union will calculate how much APR to charge you according to your application details and credit rating.
It’s worth noting My Community Finance, and the credit unions we work with, do not charge any upfront arrangement fees, but other brokers, credit unions or lenders may do.
A representative APR gives you an indication of the amount of interest typical borrowers will be charged, but in some cases, the APR on your loan quote may differ; that’s because representative APR is used only as a guide, and the actual cost of your loan will be personalised to you.
How will a loan impact my credit score?
When you fill out our loan application form, we’ll perform a soft credit check, which other lenders can’t see on your credit report, so it won’t impact your score or damage it in any way.
If you’re accepted for a loan, we’ll perform a hard credit check once you’ve signed your loan agreement. This will leave a record on your credit report, and other lenders will be able to see that you’ve applied for a loan with one of our credit union partners.
Too many applications for new credit in a short period of time can put some lenders off, which is why it’s best to try limiting applications for new credit within six months.
Keeping up with your loan repayments, and making them on time may help to boost your credit score and demonstrate to other lenders that you’re a reliable borrower.
However, defaulting on your loan or making late repayments will harm your credit score, so it’s important that you keep up with your repayments.
Can I get a loan with a bad credit score?
Credit union loans are designed for borrowers with lower credit scores, also known as a “Fair” credit score. Your credit score is influenced by how you've previously managed money - for example, settling loans and making your credit card repayments on time.
The UK's three major credit reference agencies are Equifax, Experian and TransUnion. They all have slightly different scoring methods, but borrowers fall into one of the following four categories:
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Bad
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Fair
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Good
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Excellent
A fair credit score falls between 439-530 out of 1000 for Equifax, 566-603 out of 710 for Transunion and 721-880 out of 999 for Experian.
You can check your credit score for free using the Experian, Clearscore and Credit Karma apps. Each app uses a different credit reference agency, so to get a good idea of your credit rating, use all three apps.
What are the pros and cons of a loan?
A loan is a helpful way to access funds quickly for purchases, projects or emergencies when you don’t have the money immediately available and can be a cheaper alternative to borrowing money on a credit card or using an overdraft.
A loan can also help you spread the cost of large purchases, cover short-term cash flow problems and fund home improvements that may increase your property's value.
The disadvantages of taking out a loan include the following;
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Long-term damage to your credit score if you cannot repay the loan. (Late or missing payments will be recorded on your credit report for six years)
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You may be charged fees for paying off the loan early or late payments (The credit unions we work with do not charge late payment fees, but other credit unions may do).
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If your income changes, you may find yourself unable to meet the repayments
