The financially vulnerable can now buy the latest household electrical goods at competitive prices without paying extortionate interest rates following the announcement of a pioneering scheme by The Co-operative Electrical - part of The Co-operative Group - in partnership with Credit Unions.
The initiative, the first of its kind in the UK, offers families on low incomes access to competitively priced, up to the minute appliances, coupled with an affordable loan from their Credit Union.
A loan over 52 weeks from a home-credit provider can cost 12 times more than a loan provided by a Credit Union with APR’s exceeding 270 per cent compared to 12.7 per cent at a Credit Union*.
It is estimated that in the UK, between 5 and 8 million people cannot access mainstream credit. To borrow money, they often rely on home-collected credit companies, weekly payment retailers or loan sharks, unaware that they could borrow at low interest rates from Credit Unions*.
Credit Unions are financial co-operatives owned and controlled by their members and offering convenient, community based saving schemes alongside responsible, fair and affordable lending.
The relationship with The Co-operative Electrical now enables Credit Unions to offer their members access to the wide-ranging products and services of one of the UK’s largest and most successful online electrical retailers.
David Sanderson, Commercial Manager of The Co-operative Electrical, said: “The impact of the recent recession has resulted in more and more people experiencing the restrictions of financial exclusion, paying the price for limited choice with interest rates and charges many times higher than those of mainstream personal loans.
“For those without access to credit or the available funds to take advantage of online discounts the prospect of buying electrical products can be daunting - often there is no option but to turn to high interest loans, costly weekly payment retailers or loan sharks.
“There is a need for an ethical and affordable alternative for purchasing those everyday goods that most take for granted. And, through our close relationship with Credit Unions we have developed a scheme that delivers greater choice and cost saving benefits to the financially excluded.
“We offer a comprehensive range of the latest, competitively priced products including washing machines, cookers, fridge-freezers, televisions, computers, digital cameras, sat navs and beds.
“And, when combined with the responsible and ethical lending approach of Credit Unions, the scheme offers great choice, prices and service, while addressing the issues and dangers of entering into agreements with high interest weekly payment or loan companies.”
The new scheme, initially piloted with Knowsley Mutual Credit Union (near Liverpool), is now available through approaching 100 Credit Unions with plans to extend availability to all Credit Unions in the UK mainland.
Once the Credit Union member has made their selection and had their loan approved (or agreed to release savings) in order to make the purchase, the Credit Union places the order and the item is delivered direct to their member’s home in 48 hours.
It can assist all Credit Union members, regardless of status, and also delivers a number of benefits for the Credit Union including increased new membership and customer retention.
Thomas Boynton, project manager at Knowsley Mutual Credit Union, commented: “Loan sharks and other high interest loan providers prey on people in vulnerable situations, their money often seems like an easy option at the time but debts can soon spiral out of control.
“Credit Unions offer financial support with saving plans, current accounts, free money advice and great value loans.
“Through our close relationship with The Co-operative Electrical we can satisfy a vital need for our members. Offering the latest products, a future of increased financial stability and a chance to escape high interest lenders – the scheme clearly demonstrates that alternatives exist for the financially excluded.”
Credit Unions wanting further information about this scheme can contact David Sanderson, Commercial Manager of The Co-operative Electrical, by emailing email@example.com
*Figures from ABCUL (Association of British Credit Unions Limited) show that using some Credit Union loans can cost you no more than 1 per cent a month on the reducing balance of the loan (an APR of 12.7%) - borrowing £300 over 57 weeks, the total interest repayment would be less than £21. Figures from a UK home credit provider show that if you borrow £300, you will pay back 52 payments of £10.50, which adds up to £546 and a typical 272.2 per cent APR.