Welcome to York & District Citizen's Advice Bureau's monthly advice column. Each month we will attempt to answer questions on topical or interesting subjects. As there is now a York Credit Union Study Group, this month we explain about credit unions and how they operate.

Q. What is a Credit Union?

A. Credit unions are co-operative financial organizations through which members can save money and take out loans which have a low interest rate. Credit unions are based on a "self-help" philosophy that borrowing and lending is less risky when the borrowers and lenders actually know each other. Credit unions are run by elected officers who are also members of the organisation.

Q. What services do credit unions provide?

A. Credit unions offer members the opportunity to save up to £5000, or up to 1.5 per cent of the credit union's total share holdings and receive dividends on the investment. They also allow members to have loans at low rates of interest. These loans are often available to people who would otherwise have difficulty in obtaining credit because, for example, they may not be in secure employment. Advice and help on how to manage money more effectively is also available.

Q. How do I save money in a credit union?

A. To join a credit union a member must pay a minimum of £1. This saving (called a share) is then regularly added to. Individual credit unions may have a method for collecting savings; this may be to suit the majority of the members. Credit unions may take a deposit of up to £5000 on behalf of someone under 16 years of age. A person aged 16 or over can deposit money in their own name but they cannot borrow money until they become 18 years of age.

Q. How do I borrow money in a credit union?

A. Members aged 18 or over may take out a loan from the credit union, each loan application will be considered by a credit committee. The credit committee will take into account the savings record of the borrower and their ability to repay on time. Having an acceptable credit record is not required for loans given by credit unions. A member can normally borrow up to £5000 more than their savings, up to a maximum of £10,000.

If you have a query about this, or any other subject please contact us at 3 Blossom Street, York, YO24 1AU,phone 0870 126 4850. Fax 01904 620571, Email admin@yorkcab.org.uk. You can get details of all of our services on our website at www.yorkcab.org.uk

Updated: 08:48 Thursday, July 08, 2004