Credit Unions

Where from? Run by the members who all have something in common - for example, they live in the same area, go to the same church, or share the same work.

How they work These are savings and loan co-operatives. Regular saving is encouraged but members can save any amount from £4 up to £4,000. The savings form a pool from which any member can borrow. The maximum you can borrow is £4,000 more than the amount you have saved. The maximum interest rate is set by the Credit Union Act 1979 and is currently fairly low (12.68 per cent APR). Similarly, the maximum interest rate paid on savings is also set by law and is 8 per cent a year - though many unions pay less.

Points to note Credit unions are not common in the UK. You might be interested in starting one yourself - you'll need at least six interested people who must be willing to play an active part in running the credit union. For help and information, contact:

Association of British Credit Unions 48 Maddox Street, London W1R 9BB Tel: 020-7408 1699

National Federation of Savings and Cooperative Credit Unions 1st Floor, Jacob's Well, Bradford BD1 5RW Tel: 0274 753507

Verdict Relatively cheap source of fairly small loans for any purpose. But depends on whether there's a credit union you can join.

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Insurance Policy Loans

Where from? Insurance company with whom you already have an investment-type insurance policy ).

How they work You borrow money against the surrender value of the policy to be repaid when the policy matures. The interest rate is variable and tends to be relatively low.

Points to note The maximum loan is a percentage of the surrender value so it might not be much (if anything) if you haven't had the policy long. You can't usually use a policy that's already being used for something else - such as an endowment policy to be used to repay your mortgage. You still have to pay the insurance... see: Insurance Policy Loans

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