When it comes to borrowing money, it is always suggested that you do some research. Little homework in advance will help you explore your options to choose the most affordable deal. During emergencies, you cannot waste your time on research work, so it is recommended to do it before. You can borrow money from banks, direct lenders, or credit unions.
Undoubtedly, banks follow strict criteria to approbate a loan application. They do not sign off on applications for small loans such as payday loans or any other small emergency loans. So, if you need a small amount of money, you are left with two options: credit unions and private lenders. You might struggle to choose between private lenders and credit unions.
Whether you borrow money from credit unions or online lenders, you should know the difference between them. Some believe that credit unions are better than direct lenders, while others say the opposite. The fact is that neither of them is better. Whether you choose a credit union or a direct lender, it widely depends on multiple factors such as how much you want to borrow, interest rates, your overall financial condition, and other preferences.
Loan size
The size of a loan is one of the important factors that influence your decision to borrow from credit unions and direct lenders. Credit union loans start from €500, which can go up to a maximum of €5,000 or more. However, on the other hand, direct lender loans start from €100, which can go up to €20,000 or even more.
Undoubtedly, when you need a large amount of money, direct lenders will be a better choice. In fact, they can also lend more than €20,000 if you secure it against a valuable asset such as your house or car.
As far as it is about a small amount of money, a direct lender might be able to lend you a paltry sum, such as €100. Credit unions usually do not offer less than €500.
Interest rates
Interest rates are another factor that would influence your decision whether you should choose a credit union or a direct lender to bridge the gap in your savings. Credit unions accept applications from subprime borrowers, but they charge high interest rates. Direct lenders also charge high interest rates for money due to a poor credit history.
But when you compare interest rates offered by them, you will find that direct lenders charge higher rates than they do. This is because of fees and other charges. It is not that all lenders charge higher interest rates than credit unions, but you will have to do some research to choose such lenders.
The Acceptance rate
The acceptance rate from a direct lender is higher than that of credit unions. Credit unions also accept applications from subprime borrowers, but they are not as flexible as direct lenders. If your credit rating is too bad, you will most likely be turned down. However, when you apply for a loan from a direct lender despite a poor credit rating, you will certainly be accepted. There is no doubt that interest rates will be too high, but direct lenders give you a chance to apply for a loan.
Even if you are to borrow a large amount of money, they will be able to approbate your application provided you arrange a guarantor with a good credit score or secure your loan against a valuable asset. Private money lenders in Ireland are more flexible than credit unions when it comes to lending money to subprime borrowers.
Fully regulated
Almost all credit unions in Ireland are fully regulated. They are subject to the norms that the Registry of Credit Unions has set for them. Of course, there is a lower risk of losing money as compared to direct lenders. It does not mean that all direct lenders are unregistered, but there are many who pose as genuine and registered direct lenders in order to extortionate money from gullible borrowers.
You will have to do proper research to know the reference number of a direct lender. If they are not registered, you should never borrow money from them. Whether you borrow money from credit unions or direct lenders, check the registration, so you do not end up with an expensive deal.
Remember that you cannot make any complaint against an unregistered direct lender if things go wrong.
Flexibility
Direct lenders are more flexible than credit unions. The latter is strict with its criteria. While they accept applications from subprime borrowers, too, credit unions restrict the loan amount. You cannot expect them to provide you with a large personal loan in Ireland. If somehow you are struggling with payments, they will expect you to keep adhering to the repayment term.
However, if you try to borrow money from direct lenders, you will certainly find them to be more flexible than credit unions. One of the biggest advantages of borrowing from direct lenders is that you really do not have to be worried about the loan size, despite your subprime credit file.
Of course, they might restrict the borrowing amount, but they do it when they know you will not be able to discharge your debt on time. You can easily borrow a large amount of money from them, provided you arrange a guarantor with a good credit history or apply with a co-applicant with a stellar credit file.
If you struggle to keep up with payments, you are free to talk to your lender. They will reevaluate your repayment capacity and accordingly put you on a repayment plan. They might also provide you with a payment holiday. If you choose to pay a minimum amount, you will have to pay accrued interest on the unpaid balance.
The final word
Credit unions and direct lenders are both available options when you need to borrow money, but it is always suggested that you carefully analyse your needs before choosing between them.
Whether you borrow from credit unions or direct lenders, make sure that you never fall behind on payments.