Analysis from Freedom Finance, one of the UK’s leading digital lending marketplaces, finds that membership of Credit Unions continues to rise amid a growing hunt for affordable credit products as the cost of borrowing rises sharply and the cost-of-living crisis worsens.

The latest data from the Bank of England1 for the first quarter of 2022 finds that 1.93 million people in the UK are now members of a Credit Union, an increase of more than 22,000 compared to the same period last year. 

As well as growing membership in the UK, Credit Unions are also loaning record sums to members with total borrowing surpassing £1.79 billion in Q1 2022. It marks an increase of £197 million (12%) since the opening quarter of 2021, one year ago.

Credit Union lending in England has been the major driver of this surge in total UK borrowing, with loans to members rising by £125 million (19% growth) between Q1 2021 (£661 million) and Q1 2022 (£786 million).

Credit Unions, as co-operative societies, are often able to offer smaller, shorter-term loans that can be difficult for borrowers to find through other institutions. Other specialist lenders can also charge very high-interest rates with the majority of Credit Union loans made well below the maximum interest rate, an APR cap of 42.6% set by the government.

In March, a report from the Centre for Social Justice (CSJ) - Swimming with Sharks2 – revealed that 1.08 million people are victims of loan sharks and called for reform to the Credit Union Act 1979, including the creation of a new Credit Union Mergers Fund. Freedom Finance, a supporter of the CSJ’s Debt Policy unit, supports the call for reform and a broadening of the types of credit available as the cost-of-living crisis continues to worsen following the withdrawal of many short-term credit providers.  

David Hendry, Chief Marketing Officer at Freedom Finance, said the Bank’s latest figures were evidence of households exploring every option to obtain affordable credit and the positive role the wider credit industry would need to play over the coming months to support people.

“Credit Unions are playing an increasingly important role in the UK’s lending ecosystem. This was accelerated by the withdrawal of many short-term credit providers from the market and demand is continuing to rise as the cost-of-living crisis makes borrowing more expensive and more necessary for many people.

“Unfortunately, many people can turn to sources of illegal lending, like loan sharks, if they cannot access affordable credit options as the CSJ’s recent report revealed. The research identified Credit Unions as a vital financial lifeboat for many people so raising awareness of these institutions is a crucial first step toward giving those struggling to penetrate the lending market another option to explore.

“But Credit Unions can only be one part of the solution in this economic emergency. A strong choice of reputable providers of short-term loans and other credit will be essential to helping people through the current cost crunch. 

“Consumers must also ensure they are making the credit market work for them. This involves shopping around to get the best deal as well as using the latest technology both to ensure they are being matched with the most suitable products and so that they are only presented with credit offers they are eligible for.”