What happens to your loan and savings in a credit union merger

When two credit unions merge, your loan and your savings move with you. The legal cap on what a credit union can charge for a loan does not change: by law, a credit union can charge no more than 3% a month on the reducing balance of a loan, which is an APR of 42.6%¹. Many credit union loans cost around 1% a month, an APR of 12.7%¹. The Credit Unions (Maximum Interest Rate on Loans) Order 2013 raised that ceiling from 2% a month to 3% a month².

Your savings stay protected. Loans and savings in credit unions are covered by the Financial Services Compensation Scheme, and branches of the same legal entity count as the same business, so FSCS can protect up to £120,000 in total across all accounts within the same credit union⁴. If two credit unions merge into one legal entity, your combined balance is measured against that single limit.

What changes is the credit union itself: its name, its common bond, its board and its dividend policy. A merger is a good moment to check your repayments, your paying-in arrangements and your membership terms, and to ask the merged credit union what happens next.

Your loan rate stays within the legal cap of 3% a month

A merger does not remove the legal ceiling on credit union loan interest. The Credit Unions (Maximum Interest Rate on Loans) Order 2013 increased the maximum interest a credit union may charge on a loan to 3% per month², up from 2% per month before the Order³. The rate specified for the purposes of section 11(5) of the Credit Unions Act 1979 is three per cent per month². In Great Britain, the maximum interest a credit union may charge on loans is 3% per month, and Schedule 14 also caps the interest a credit union can charge on hire purchase agreements and conditional sale agreements⁷.

Credit unions themselves state the same rule. One credit union says that by law credit unions cannot charge any more than 3% per month on the reducing balance of a loan⁸, and another says the maximum interest rate a credit union can charge its members for a loan is 3% per month⁹.

Within that cap, the merged credit union sets its own rates. Many credit union loans cost 1% a month on the reducing balance, an APR of 12.7%¹, and credit unions offer competitive rates on personal loans of up to about £3,000¹. If your loan terms change, the new rate must still sit inside the 3% a month ceiling. Read the terms you are sent and check the rate against the cap.

Repayments, paying in and withdrawing: what to check

After a merger, the practical questions are how you pay, how often you pay and how you get money out. Credit unions assess a loan against the member's record of savings and loan repayments, as well as ability to repay¹⁰. A credit union will review your income, ability to repay, membership status and overall financial situation¹¹. Repayment frequency options at one credit union are weekly, fortnightly, four-weekly or monthly¹².

Repayments on a credit union loan are calculated on your reducing balance, so you pay less interest with each repayment¹³. That means the balance falls as you repay, and the interest charged each period is worked out on what is left.

What to check when your credit union merges:

• Your repayment amount and date. Confirm the figure and the day it leaves your account.
• How you pay in. Payroll deduction, standing order, direct debit or branch payment may change.
• Withdrawals. Ask whether notice periods or branch arrangements have changed.
• Your loan documents. Check the rate, the term and any fees against the terms you are sent.

If you are struggling, talk to the credit union before arrears build. If you miss payments on a loan, the credit union may be able to use your savings to repay the loan⁶. That is a strong reason to keep repayments up and to ask for help early.

Savings, shares and the annual dividend

In a credit union, your savings are your shares. Each £1 of savings in the credit union equals a share in the credit union¹⁶. Instead of paying interest on regular savings, credit unions pay a dividend when the credit union performs well; the dividend is proposed by the board of directors and voted on by members at the AGM⁵.

The rate varies. Remaining income may be returned to members as an annual dividend and loan interest rebate, and the rate can vary from credit union to credit union and depends on the surplus of money available after all expenses are paid¹⁸. One credit union paid a dividend of 1.5% on members' shares for the financial year 2024/25²⁰, and another reported a 2% dividend for its members in 2026²¹. These are individual credit unions' own figures, not a market rate, and they show how much the payout can differ.

A merger changes which surplus the dividend is calculated from. The financial year at one credit union runs from 1 October to 30 September²². If your credit union merges partway through a year, ask how the merged credit union will treat that year and when the next dividend will be decided.

Membership and the common bond when credit unions join

Membership of a credit union is based on a common bond²³. A common bond determines who can join²⁴. When credit unions merge, the common bond of the merged credit union usually widens, because it has to cover everyone who was already a member of both.

Proposals have been made to allow a credit union serving people living in the same area to cover a population of up to 10 million²⁵. That is a proposed change, not the current rule, but it shows the direction of travel: larger common bonds covering wider areas.

Family membership usually survives a change. As long as one member of a family meets the common bond requirements and has joined the credit union, other family members living at the same address can usually join¹¹. Anyone in the house of a person with a common bond with a credit union can usually join²⁶. One credit union's rule is that you must work for one of the employers listed in its common bond, or be a close relative of an existing member employed by one of those employers and live at the same address as that relative²⁷.

If the common bond changes, check whether you still qualify and whether your family members can still join. Lending rules can differ too: some credit unions lend as soon as you become a member, others only after saving for a set period, and affordability is checked against the money left after paying bills¹¹. 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 on the credit union's loan policy¹⁵.

Fees, free life cover and other member benefits

Many credit unions include insurance benefits with membership at no extra cost, and these usually continue after a merger. One credit union includes life insurance at no cost to the borrower²⁸, and another offers Life Savings, Loan Protection and Death Benefit Insurance at no extra cost to members²⁹. At one credit union, all members automatically enjoy free Life Savings and Loan Protection benefits²⁸. Another provides free protection on life savings and loans³⁰, and describes membership as coming with free protection, including Life Savings and Loan Protection³¹. One credit union lists free loan and savings insurances³², and another includes free loan protection offering extra security for the member and their family³³.

Some loans are secured against savings rather than other assets. A secure loan is secured against your credit union savings, not your home or any other asset³⁵, and the savings insurance is provided free by the credit union³⁶.

Check what your merged credit union provides:

• Life savings insurance. Cover on your savings, usually at no direct cost.
• Loan protection. Clears or reduces a loan on death, usually at no direct cost.
• Death benefit insurance. A payment to a member's estate or nominee.
• Fees. Ask whether any account or loan fees change.

These benefits are set by each credit union, so the merged credit union's terms may differ from what you had before. Ask for the current list in writing.

How your savings and loans are protected

Loans and savings in credit unions are protected by the Financial Services Compensation Scheme³⁷. Branches of the same legal entity are considered to be the same business, so FSCS can protect up to £120,000 in total across all these accounts within the same credit union⁴.

That limit matters in a merger. If two credit unions become one legal entity, your savings in both are added together and measured against the single £120,000 limit. If you hold more than that across the merged credit union, the excess is not covered.

If a credit union declines a loan, it may be because the loan is not affordable, existing debt is too high, borrowing may cause financial harm, information is missing, or lending criteria are not met³⁸. Credit unions are limited by law in how much interest they can charge³⁹, and the assessment standards for credit union loans, such as the level of checks a lender may have needed to do before lending, will typically be lower than those imposed on lenders and loans covered by CONC⁴⁰.

If you have a complaint about a credit union loan, the Financial Ombudsman Service can look at complaints about unaffordable lending⁴⁰. Free, impartial help is available from MoneyHelper and from debt advice charities such as StepChange and National Debtline.

If you do not accept the new terms

A merger usually comes with updated terms and conditions. One credit union told members who did not wish to accept the changes to contact it before 12 October 2026, or they would be assumed to have accepted them⁴¹.

If you object to the new terms, your options include:

1. Contact the credit union before the deadline and say you do not accept the changes.
2. Ask what happens to your account if you do not accept, including whether it will be closed.
3. Ask about your loan if you have one, because closing an account with a loan outstanding is not straightforward.
4. Take free advice from MoneyHelper or a debt advice charity before deciding.

Do not simply stop paying. If you miss payments on a loan, the credit union may be able to use your savings to repay the loan⁶, and arrears can affect your credit file.

Finding your credit union after a merger

Most local areas have a credit union²⁶. You can search at findyourcreditunion.co.uk¹¹. Credit unions offer online and phone banking, a payroll partnership with your employer, a local branch or service point you can walk into, or a combination of all three⁴². Each credit union has a volunteer board of directors⁴³.

If your credit union has merged, the merged credit union's website and branch will carry the new name and the new common bond. Check the credit union directory for the current listing, and see finding a credit union you can join for how to check who each one accepts.