Initially, a start up or small credit union, by regulation, can only lend out up to 90% of all the funds deposited with it by owner-members. A larger credit union having achieved the qualifying amount of reserves and with Regulatory consent can lend up to 95% of all funds deposited by owner-members. The balance of these funds is to allow for any requests for share withdrawals and to meet the credit union’s running costs.

This is why a credit union can ask owner-members to save for a particular period of time before qualifying for a loan and to continue to save an agreed amount while repaying it. In this way, the shares deposited in the credit union, used to fund the loans, grow constantly, allowing the demand for loans to be satisfied.

Before a new credit union is authorised by the Regulators and allowed to accept actual share deposits from owner-members, the application form for owner-membership asks for a commitment to save regularly by direct debit or standing order, or irregularly by single payments.

In this way both new and established credit unions can determine how much money is available to lend out at any one time and know that this fund will grow as owner-membership increases, when more shares are deposited and loans repaid.

Loans are usually granted for an amount greater than the shares deposited or a multiple of that sum up to set limits permitted by Regulation and the policies of the credit union, with the maximum rate of interest and repayment terms set by regulation. A unique credit union difference!

Current maximum loan conditions are published regularly by the credit union.

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