Credit Union Loans – The Safer Borrowing Option

Happy Family Playing among flowers
“Credit Unions operate on a more personal level…”
Borrowing money can be a scary process for some, applying with banks, having our credit history checked and then waiting nervously to find out whether we will be approved or not. Yes, this scary process can be made all the more daunting when we are aware that our credit history may have a blemish in it. So why is it that most New Zealanders risk having their credit score decreased further by applying to a financial institution that only cares about perfect credit scores and making profits?

The Risk of Borrowing From a Bank

Majority of New Zealanders trust their finances with the big Australian banks. These banks are great for everyday transactional banking as they can offer a wide range of products and services to suit their customer’s needs. However, these banks are operating for the sole reason to make profits for their overseas shareholders. We New Zealanders, the majority of the time are just a number to them, and they do not operate on a personal level. This is made clear when it comes to borrowing money, because if we don’t have a near perfect credit score, then we will be turned away with no questions asked. Banks must protect their shareholders by setting high credit limits. Even if you have been banking with them for years, if you have missed one week’s rent or have multiple credit cards elsewhere, you may struggle to get approved.

Can We Try Them Anyway?

Many New Zealanders go ahead and apply for personal loans with their bank, in order to keep their money centralised. However, as we said earlier, the chances of being approved for a loan is pretty slim if we have ever missed a rent payment or fallen behind on our bills. Applying for a personal loan and having a credit check performed, damages our credit score if we are declined. If we apply at our first bank and get declined, then it is going to be even more likely we get declined at our second option too.
Applying to multiple banks for personal loans can do more harm than good. If we do not have a perfect credit history and credit score, then we have effectively decreased our rating (with multiple credit checks), to the point where no bank or credit union can lend to us. All that would be left would be high-interest payday loans, but you can read one of our blogs here as to why that shouldn’t be your answer. So what should we do?

Make a Credit Union Your First Choice

If we are unsure of whether or not we would have a personal loan approved from a bank, we should save our self the risk and make a credit union our first choice. Credit unions are not for profit organisations that operate nationally within their own country. Offering lower interest rates on loans and higher interest rates on savings, credit unions are set up with their members best interests at heart as all profits go back to the members through even better rates and savings. We should make a credit union loan our first choice, as a credit union’s lending criteria is much easier to achieve than a bank’s. A credit union operates on a more personal level and treats each application on a case by case basis as they know that each of their members are different. We don’t need to switch banks to apply. We can keep all our everyday transactional functions with our current bank and we can sign up to be a member of a credit union too. Let’s save ourselves the risk of having our loan declined, by opting for the safer and more flexible option of a credit union loan.

So here are the main notes you should take away from this article:

  • Banks have high credit thresholds, making it difficult to be accepted for a loan.
  • Applying at multiple lending institutions and being declined, damages your credit score further, making it harder to be approved.
  • Credit Unions take each application on a person by person basis. This means your situation will be heard and loan more likely approved.

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