How an IVA affects credit union membership and savings

An individual voluntary arrangement (IVA) is a legally binding agreement between you and your creditors to pay some or all of your debts over a set period¹. It is recorded on your credit reference file for six years and can affect your ability to get further credit². If you also hold a credit union account, the IVA does not automatically close it, but it changes what you can do with your shares and your borrowing.

The key point is that credit unions link your savings to any loan you have. Members' savings are used to fund loans to other credit-worthy members³, and if you miss payments on a loan, the credit union may be able to use your savings to repay the loan⁴. Your savings are still protected by the Financial Services Compensation Scheme, just the same as a bank account⁵.

This page explains how membership, savings, dividends and withdrawals work when you are in an IVA, and where to get free help.

Credit union membership: a £1 share, one vote and a common bond

Credit unions are not for profit community lenders, providing affordable loans and savings¹⁰. Each member holds a £1 share, and each gets one vote, no matter how much they have in savings⁸. Each credit union has a volunteer board of directors⁸.

Your savings are your shares. Each £1 of savings in the credit union equals a share in the credit union¹¹, and each and every £1 you save is equivalent to 1 share¹². Members' savings, called shares, are valued at £1 each⁶. Members enjoy equal rights to vote, one member one vote, and participate in decisions affecting the credit union¹³.

Membership is built on a common bond, which is what connects members to a credit union. You can read more about who can join a credit union and how to join.

An IVA is personal to you. It does not change the common bond, and it does not remove your membership. What it can change is how much you can pay in, how much you can take out, and whether you can borrow more.

Your savings are linked to any loan you have

This is the single most important thing to understand about credit unions if you are in an IVA. Unlike a bank, where your savings and your borrowing are usually kept separate, a credit union treats your shares as security for your loan.

Members' savings are used to fund loans to other credit-worthy members of the credit union³. If you are a member of a credit union, you can usually borrow at least two or three times the amount you have in savings, depending upon the loan policy of your credit union⁴. The same rule appears in Scottish guidance: you can usually borrow at least two or three times the amount you have in savings¹⁴.

That link works in both directions. It means your savings can help you borrow more than you could otherwise. It also means your savings are not entirely yours to withdraw while a loan is outstanding.

If you are in an IVA, in most cases you cannot take out loans or credit while your IVA is active, including borrowing from family and friends, and you must talk to your IVA supervisor before borrowing money¹⁵. So a new credit union loan is unlikely to be an option during the arrangement.

Where a loan payment is missed, savings can be used to repay it

If you miss payments on a loan, the credit union may be able to use your savings to repay the loan⁴. The same rule is stated in Scottish guidance¹⁴ and in guidance covering credit union loans generally¹⁶.

This matters in an IVA because your budget is tight by design. If a credit union loan payment is included in your IVA, the arrangement sets out what you pay. If a payment is missed, the credit union's own rule on using savings can kick in, and your shares can be taken to cover the shortfall.

Some credit unions build saving into the loan itself. One credit union offers a personal loan where you build savings as you repay your loan¹⁷. That is a feature of the product, not a protection against a missed payment.

If you are struggling with a credit union loan, see falling behind on a credit union loan.

Borrowing from a credit union with a poor credit history

Credit unions provide access to fair and affordable credit for people with a poor credit history¹⁰. They historically offered simple savings and loan products to financially excluded individuals¹⁸. These borrowings are usually at a low interest rate and the repayments can have some flexibility¹⁹. Credit unions are also described as alternative borrowing options to payday loans²⁰.

That does not mean an IVA is ignored. An IVA can affect your job, your home and your ability to get credit in the future²¹. The IVA stays on your credit report for six years from the date that it is approved⁹, and it will appear on your credit reference file for six years, making getting credit harder during this time²². It is recorded on your credit reference file for six years and can affect your ability to get further credit².

So the practical position is this: a credit union may be more willing than a high street bank to look at your circumstances, but while your IVA is active you generally cannot take out new credit at all¹⁵. After the IVA ends, a credit union may be one of the more accessible places to rebuild, depending on its own lending policy.

You need to be a member of a credit union to get a loan from them, and some will ask you to build up savings first²³. One credit union states that a member will normally be expected to establish a regular pattern of savings before applying for a loan²⁴. See do you need savings to get a loan? for more on this.

Paying in, withdrawing and receiving a dividend

Paying in. Members can contribute to their credit union account by Direct Debit, payroll deduction, standing order or BACS transfer⁶. Some credit unions also run a benefits deduction scheme: when your benefit payment arrives, the credit union first takes the agreed loan repayment and savings contribution, and the remaining balance is yours to withdraw or keep in savings²⁵. If you are in an IVA, your income and expenditure budget is agreed with your supervisor, so any new savings contribution needs to fit within it.

Withdrawing. Members can withdraw their credit union savings provided they are not pledged as security for a loan²⁶. If you have a loan, your shares may be pledged, so you may not be able to take the full amount out. See getting your money out and withdrawing shares while repaying a loan.

Dividends. Credit unions traditionally do not pay interest on savings. Instead, depending on the performance of the credit union, a dividend is paid on savings, agreed at the AGM²⁷. A dividend may be payable but cannot be guaranteed, and if a dividend is payable it will be added following the AGM²⁸. One credit union describes the possibility of earning a dividend when the credit union does well²⁹. The remaining income may be returned to members as an annual dividend and loan interest rebate, with the rate varying between credit unions depending on the surplus available after expenses³⁰.

Credit union dividends are treated by HMRC in the same way as interest on savings accounts. They should be declared in your tax return but can be part of the non-taxable Personal Savings Allowance²⁹.

Can other people in my household stay members or join?

An IVA is personal to you, so it does not affect another person's membership. Many credit unions allow household members to join through an existing member. One credit union allows you to join if you live in the same household as an existing member, so you can join through their membership³². Another states that family or partners who reside in the household of a member are eligible to join³³. A third requires you to work for one of the employers listed in its common bond, or be a close relative of an existing member who is employed by one of those employers and live at the same address as that relative³⁴.

If you are the member in an IVA and someone else in your household wants to join, they would normally join in their own right, with their own shares and their own vote. Their savings are not yours, and your IVA does not reach them. See can your family join too?.

How your credit union savings are protected

Credit union savings are protected by the Financial Services Compensation Scheme, just the same as a bank account⁵. The current limit is £120,000 per eligible person, per credit union, since 1 December 2025⁷. One credit union states that savings are protected up to £85,000 by the Financial Services Compensation Scheme³⁵; the current limit is £120,000⁷. Another states that members' savings are protected by the Financial Services Compensation Scheme³⁶. Loans and savings are protected by the Financial Services Compensation Scheme¹⁰.

Some credit unions add further protection at no extra cost. One states that as a member you receive free insurance protection on your savings and loans, subject to the policy terms and conditions³⁷. Another states that savings are protected by the FSCS³⁸. See life savings insurance for more on this.

An IVA gives you its own protections. You are protected from legal action on all included debts during the IVA³⁹, and an IVA protects you from further action as long as you keep up with payments⁴⁰. One of the main advantages of an IVA is that your house is protected⁴¹. You may also use assets, such as equity in your home, to repay what you owe³⁹.

There is one condition to be careful about. You must provide a full list of creditors, and any missed out can apply to the court to have your IVA cancelled⁴².

Where to get help finding or contacting your credit union

To set up a savings plan and become a member, you can join online, speak to your employer, or contact the credit union directly³⁵. To find a credit union you can join, you can search through the Association of British Credit Unions' website or call 0800 015 3060⁴³. The website findyourcreditunion.co.uk can also help you locate credit unions⁴⁴.

For free, impartial debt advice, StepChange, National Debtline and Advice NI all publish guidance on IVAs and credit unions. If you are in an IVA and worried about a credit union loan or your savings, speak to your IVA supervisor before making changes.