A new online credit union that promises to offer an alternative to payday loans has opened its doors to savers and borrowers across the UK.
My Community Bank says it will be offering loans aimed at those with poorer credit ratings, but at a much lower cost than those available from payday lenders.
The credit union is also promising to offer market-leading rates to savers across the country.
Credit unions are usually small non-profit organisations that service the savings and borrowing needs of their local communities.
But what makes My Community Bank (MCB) different is that it's available to people across the UK, who will be able to apply for the products via the internet.
So far MCB has three fixed rate savings products on offer – one, two and three year deals paying 2.15%, 2.25% and 2.75% respectively.
These rates are highly competitive when compared to similar products, but savers will only be able to deposit up to a maximum of £15,000.
The union is also offering loans between £500 and £3,000 at a representative APR of 26.8%. The minimum term is set at six months, but borrowers will be charged no early repayment fees for repaying before the end of the term.
Eventually MCB says these loans will be issued 24 hours after borrowers apply for them.
While these rates are higher than what is available on the high street, they are targeted at borrowers who have poorer credit records, and are significantly lower than what payday lenders such as Wonga and Quick Quid (QQ) are charging.
For example, borrowing £500 over 30 days will cost you £11 in interest with MCB, while the same loan with QQ will cost £125 in interest or a whopping £150 at Wonga.
Although MCB is available to borrowers and savers across the UK, there is a catch.
Like all credit unions, members must share a common bond.
MCB was initially started for people from the South Asian community living in London.
It has since grown, but members will still need to have some sort of connection to the South Asian community in the UK. The union's CEO Mohsin Mehdi said this could be anyone who supports a South Asian charity or is a member with any group involved with the community.
But the creation of a nationwide credit union is good news as it hopefully means that more such organisations will be encouraged to open their doors to a wider membership, thereby offering an alternative to those with poorer credit histories who sometimes have no alternative but to turn to payday lenders.
Read our guide to find out more about credit unions
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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