Improving financial health

The problem

We’ve always seen ourselves as a community development credit union.

CCU exists to improve the wellbeing of local residents so we can address key challenges for the City Region including:

Supporting the half a million Liverpool residents who live in the top 20% most deprived neighbourhoods in England.
Working with young savers to address the fact that our Head Office is located in a ward with 42% child poverty and only 60% of 16- to 17-year-olds do not have a savings account.
Cutting borrowing costs because Liverpool has one of the lowest levels of disposable income in England. Consequently household savings ratios are very low.
Encouraging saving. Legal & General research shows that the average working family in the UK had sufficient money to keep them going for just 14 days. That falls to two days for a private tenant and 0 days for a social tenant

Our members are constantly telling us how good the Credit Union has been for them.

In fact for savings Central Credit Union is rated 5/5 on Smart Money People. And for loans 4.96/5!

How the credit union promotes good financial health

One of the goals of the credit union is “The training and education of Members in the wise use of money and in the management of their financial affairs”.

To achieve this objective we:

1. Encourage people to save as they borrow

Building a safety net is the best way to improve financial health.

Through our Save as You Borrow scheme, a proportion of the loan repayment is allocated to a savings account. This cannot be accessed until the loan is repaid, reducing the need to borrow in the future.

Borrowing members overwhelmingly live in lower income areas. Half of all Liverpool residents have no savings, but because of our Save as You Borrow scheme two thirds of borrowers now have more than £100 in their savings accounts.

2 Reduce loan rates for regular savers

We go a step further by rewarding regular savers with reduced interest rates on loans.

Members then have the option to put the interest saved into their savings account.

Once a member has been with the Credit Union for 2 years, their savings to loan ratio is 25p for every £1 borrowed. Members with five years’ membership have 60p in savings for every £1 borrowed.

3. Provide money tips

We regularly share regular money tips to improve financial literacy and education. These are read by more than 100s of people every month on our website, email newsletter and social media.

And this has a positive impact on financial well-being too.

As a result, 65% of CCU members are confident in managing money compared to 58% across the UK.

4. Help members improve their credit profiles

We’ll be piloting a new mobile app which members can use to track their financial health. The app will be used to let applicants know how to improve their credit profile, increasing the chances of getting a loan.

Three Financial Health Indicators will show movement from red through amber to green. Because of these, borrowers will be provided with tips, making it more likely that loan decisions move from ‘no’ to ‘yes’.

We know that credit scoring isn’t easy to understand. And, to be honest, it’s not something we particularly like either. Instead, Financial Health Indicators are a fairer way to assess loans.

5. Help members budget better

Individual circumstances vary. Our staff sit down with members, face to face, to help them draw up a budget to ensure that loans are affordable.

This service will soon be available digitally through the new mobile app. Our Open Banking service enables members to provide temporary access to a bank account so the Credit Union can retrieve 90 days of bank transactions.

Subsequently, the 90 days of transactions will be presented back to members as an income and expenditure budget using the 50/30/20 rule.

The method is simple. Households split their income into three different categories: essentials (needs: 50%). Flexible spending (wants: 30%). And financial plans (goals: 20%).

Of course, everyone’s spending habits present an opportunity to save money. This information will help borrowers find ways to improve their budget.

55% of members think it’s important to save for a rainy day. Only 40% of people across the UK would agree.

6. Help members maximise their income

With further extensions to lock downs, including in Liverpool itself – we recognise that many of our members are facing financial hardship. The furlough scheme is changing. People in retail and the entertainment industry are suffering. And it’s likely that there’ll to be worse to come.

Some of our members and potential members might have to claim benefits and tax credits for the first time. That can be a daunting task. People losing income may also be able to claim tax credits without realising it.

That's why our benefits calculator helps members find out what they are entitled to.