Save-to-borrow and saver loans at credit unions

A saver loan from a credit union is borrowing secured against your own savings rather than your home or any other asset. You build up a balance, then the credit union lends you a multiple of it, commonly two or three times what you have saved. The savings stay in place as security while the loan runs, and you get full access back once it is repaid.

The appeal is that the security is money you already have, so nothing you own is at risk of repossession. The trade-off is that your savings are tied up, and if you fall behind the credit union may be able to use them to repay the loan. You must be a member of the credit union first, and some ask you to save regularly for a period before you can borrow.

Amounts, terms and eligibility differ from one credit union to the next, so the sections below set out the range of what providers state, what drives the differences, and what protects you if something goes wrong.

A saver loan is secured against your credit union savings

The security on a saver loan is your own savings balance. One credit union states it plainly: the loan is secured against your Credit Union savings, not your home or any other asset². Another says simply that loans are secured against your savings⁶. That is a different arrangement from most secured borrowing, where the lender takes a charge over property. A secured loan is money you borrow that is secured against an asset you own, and if you fall behind on a loan secured against your home the lender could repossess it and sell it⁷.

Because the asset here is a savings balance rather than a house, the consequences of falling behind are different. The credit union may be able to use your savings to repay the loan if you miss payments¹. That is a real risk to plan for, but it does not put your home at risk.

There is one important exception to check. Some savings accounts are not eligible as security: one credit union states that loans may not be secured against savings held in its Premier Savings Account, and that this applies to loans from that credit union and other lenders⁸. If you hold more than one savings account with your credit union, confirm which balance the loan will be secured against.

How much you can borrow: from your savings balance to three times it

The amount you can borrow is tied to what you have saved. Independent guidance is consistent that credit union members can usually borrow at least two or three times the amount held in savings, depending on the credit union's loan policy¹. One credit union describes the same rule as borrowing up to two or three times your savings¹¹.

Individual credit unions set their own multiples and caps. One offers up to three times your savings balance¹². Another allows up to three times the amount saved, up to a maximum of £15,000¹³. A third sets the same three-times multiple with a £15,000 limit¹⁴. One saver loan product allows borrowing of £100 up to the value of your savings, a lower multiple than the three-times examples³.

Some products carry their own caps. One credit union's Christmas loan allows up to three times what you have saved in your basic savings account, up to a maximum of £10,000 above the level of savings in that account¹⁴. Another offers a higher amount, up to three times the value of your savings balance, once the current loan is fully repaid¹⁵.

The pattern is that your savings balance sets the ceiling, the credit union's policy sets the multiple, and a maximum loan amount caps the result. Because the multiple and the cap both vary, two people with the same savings could be offered different amounts at different credit unions.

Interest, fees and early repayment

Credit unions are set up to lend to members at a fair and reasonable rate of interest¹⁶. Rates are set by each credit union rather than centrally, so the rate offered depends on the provider and the product. One example, the Saver Loan, runs from £100 up to the value of your savings¹⁷.

On fees, the credit unions named here are consistent. Plane Saver Credit Union states there are no hidden or upfront fees, even when the loan is repaid early¹⁸. Capital Credit Union advertises fixed repayments, no setup fees and no early repayment charges¹⁹. Grampian Credit Union states no early repayment fees on all of its loans²⁰.

That matters if you expect to clear the balance ahead of schedule. On some borrowing, settling early triggers a charge; these credit unions state that it does not. If you want to understand how the interest on a loan is worked out over its term, see how loan interest is calculated.

Early repayment is worth checking against your own agreement rather than assuming, because the terms are set credit union by credit union. If you do clear the loan early, the savings that were locked as security become available again³.

Who can get a saver loan and how long you must save first

You have to be a member of a credit union to borrow from one¹⁹. Membership works through a common bond: members must share something such as living in the same area, working for the same employer, or belonging to a trade union or other special interest group²⁰. Some credit unions require you to live in a certain area or work in a certain type of job²¹. Most local areas have a credit union¹⁹, and as long as one family member meets the common bond and has joined, other family members living at the same address can usually join too²².

Some credit unions ask you to build up savings before you borrow²³. One requires saver loans to be issued only to members who have saved for a minimum of 10 weeks, or made three consecutive monthly standing order payments⁴. Another asks applicants to be existing members, aged 18 or over, and to have been saving regularly for the past 3 months²⁴.

Age rules vary. One credit union requires applicants to be aged between 18 and 79²⁵. Another asks for 18 to 74³. A third sets 18 to 65 for a particular loan²⁶. Others simply require you to be 18 or over²⁴.

If you are weighing up where to borrow, credit union loans covers the wider picture, and payday lender or credit union loan compares the two directly.

What happens to your savings while the loan is outstanding

Your savings act as security, so access is restricted while the loan runs. One credit union states that your savings are locked while the loan is outstanding, and that once the loan is fully repaid you regain full access to your savings balance³. Another allows you to withdraw savings at any time provided they have not been used as security on an existing outstanding loan²⁷. A third allows withdrawals from your Regular Saver only of amounts above your remaining loan balance⁶.

The practical effect is that the money you saved to unlock the loan is not available to spend while you are repaying it. Plan your budget on the basis that the savings balance is committed.

If you miss payments, the credit union may be able to use your savings to repay the loan¹. That is the mechanism that makes the loan secure for the lender, and it is the main risk for the borrower: falling behind can erode the savings you built up.

Repaying the loan

Most people repay a credit union loan by direct debit. If you work for one of a credit union's select partner employers, repayments may be taken directly from your wages or salary each pay day by payroll deduction, and additional payments can be made by debit card or cheque deposit²⁸. One credit union takes repayments directly from your salary so the loan is repaid manageably and consistently over time²⁹.

Decision times vary. One credit union advertises a decision within 2 working days³⁰. Another says 3 to 5 working days from receipt of any supporting paperwork, usually quicker after your first loan³¹. A third says the process takes around 7 to 10 working days, with daily text updates¹⁴.

On topping up, one credit union allows members to top up their saver loan provided the current loan is not in arrears¹³. Another offers top-up loans after 3 months²⁶. Others require the existing loan to be repaid in full first. If you are considering adding to an existing loan, topping up an existing loan explains how that works.

What protects you

Credit union savings are covered by the Financial Services Compensation Scheme, the same protection as savings in a bank or building society⁵. Loans and savings at credit unions are protected by the scheme⁵. That protection applies to the savings you hold, including the balance securing your loan.

Because the loan is secured against savings rather than property, the repossession risk that attaches to a homeowner loan does not apply here. A consolidation loan secured against your home means that if you fall behind the lender could repossess your home and sell it⁷. A saver loan does not carry that consequence.

What the protection does not cover is the savings themselves being used to clear arrears. The scheme protects your money if the credit union fails; it does not stop the credit union applying your savings to an unpaid loan¹.

If you have a complaint about a credit union, complaining about a lender or finance company sets out the route. If you cannot repay, what to do if you can't repay a loan covers your options, and debt consolidation or free debt advice compares consolidating with getting help.