This edition of the Fincap Week guest blog comes from Hoot Credit Union.
When it comes to managing your household budget, saving energy, applying for credit or knowing what your credit score means do you know what you are doing?
Around four out of ten adults do not know their current account balance to within £50. The same proportion of adults – about 21 million – have less than £500 savings to cover an unexpected bill. (www.fincap.org.uk); their ability to cope with debt is therefore limited. In addition, many more people struggle with financial literacy; not being able to understand financial terms or work out their balance sheet.
When asking about a loan the most common response to the question “How much do you want to borrow?” is “How much can I have?” All too often mainstream lenders, credit card companies and rent to own retailers encourage as big a loan as they think someone can afford without really checking that is the case or knowing whether they can manage the debt. Debt is ok just so long as it is manageable. Credit unions aim to help people access affordable credit that might reduce their chances of going to a high-cost lender or rent to own high street retailer.
Many Hoot members take advantage of a credit union loan to buy a washing machine from our partners at Furniture 4U. An A rated washing machine will cost over £1000 including interest and charges form a rent to own retailer. The same machine can be bought with a Hoot loan for £214. The challenge is how we encourage people to look at the whole picture, i.e. what they will be paying back in total, rather than what they think they can afford to pay now.
At Hoot Credit Union we have introduced support and resources to support people in understanding their own financial situation so that they can get into a savings habit and borrow responsibly. As ethical organisations credit unions spend a lot of time with members making sure that they understand what they are getting into when they take out a loan or referring them to partner organisations that can help people when the debt becomes unmanageable.
Once someone is managing affordable credit and building up a savings pot to deal with unexpected household expenses they are better able to manage their finances, reduce stress and increase their financial know how by taking advantage of money saving ideas.
This is why Hoot is working with partners in Bolton to support Financial Capability Week. Throughout the week we will offer information and advice on a number of things that people can do to become money savvy.
The credit union alongside partners Bolton at Home, Bolton Moneyskills, Furniture 4U and AgeUK Bolton will be talking to people about the cost of borrowing, understanding financial terms like APR and helping them to understand their credit report. Activities will also focus on saving energy and giving tips on keeping warm this winter, benefit checks, pensions and entitlements available for people over 50, taste tests and how to save pounds on their household budget.
If you are in Bolton on Wednesday 16 November come along to The Square in Victoria Square to find out more.
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