Credit Union Loans: How Much Can I Borrow?

Are you contemplating how much you could borrow for life’s unexpected turns or planned milestones? At Metro Moneywise, we understand that the right loan amount can make all the difference. That’s why we’ve tailored a suite of personal loan options to fit your unique financial journey.

Whether it’s managing unforeseen costs with our Everyday Loan, or funding bigger dreams like home improvements or a new car with our Aspire and Premium Loans, our diverse loan offerings are designed to meet you at your point of need, providing the financial support you require with the flexibility you desire.

Assessing your loan application

Your borrowing capacity is influenced by several factors:

1. Your Credit Score

In the UK, financial institutions are mandated by regulations to assess a customer’s creditworthiness before agreeing to a credit contract. The Financial Conduct Authority (FCA) states that this includes evaluating a customer’s ability to make repayments without financial hardship​​. The checks a lender must perform are not strictly defined but should be appropriate and proportional to the customer’s circumstances, such as the credit type, amount, cost, and the customer’s financial position​​.

The idea that a high credit score is essential for borrowing is not entirely accurate. While credit scores are a factor, credit unions like Metro Moneywise assess a broader spectrum of financial health indicators, as opposed to the more automated decision-making processes of traditional banks. Nonetheless, a healthy credit score remains advantageous, as it can positively impact the conditions of your credit agreements and broaden the selection of financial products accessible to you.

2. Your eligibility for Salary Deduction

The possibility of repaying your loan directly from your salary can influence your borrowing capacity. Salary deduction is a service we offer, allowing for hassle-free repayments and sometimes enabling a higher borrowing capacity due to the reduced risk of missed payments. To be eligible for this, your employer needs to be partnered with us, which many public sector employers in the North West, like Rochdale Council and NHS trusts are.

While salary deduction offers convenient repayments directly from your salary, potentially enhancing your borrowing capacity, it’s not the only option. We also provide direct debit repayment methods, ensuring all members have access to loan services. So even if your employer isn’t partnered with Metro Moneywise, you can still apply for a loan and benefit from our flexible repayment options.

3. A steady income, and your Debt-to-Income Ratio

Having a steady income is fundamental when assessing borrowing capacity because it demonstrates your capability to meet loan repayments over time. Lenders often use the debt-to-income ratio, a comparison of your monthly debt against your gross income, to gauge financial health. A lower ratio suggests you’re less stretched financially and a better candidate for borrowing. For example:

• Good Debt-to-Income Ratio:
  • If your take-home pay is £1,500 a month and your monthly debt payments are £300, your debt-to-income ratio is 20%.
  • This ratio is considered excellent, showing lenders that you have a comfortable buffer to manage additional credit if needed.
• High Debt-to-Income Ratio:
  • However, if your take-home pay is £1,500 and your monthly debt repayments are £750, your ratio is 50%.

For those with higher ratios, Metro Moneywise offers a debt consolidation loan, which could reduce your monthly payments and help align your debts with your income level. This can be particularly beneficial for those seeking to improve their financial situation and simplify their finances​​.

4. How well you are managing existing debts

Existing financial obligations like other loans or credit card debts could be a hurdle to your borrowing capacity. It’s advisable to cut down existing debts, which could also spruce up your credit score (more on this below).

Tips to increase your chances of being approved for a loan

Here are some actionable tips for improving your chances of being approved for a loan:

1. Register to vote

Registering on the electoral roll has tangible benefits for your financial health. By registering, you solidify your credit report with verifiable personal details, which Experian says is beneficial for improving your credit score​​.

This enhancement to your credit report can lead to smoother credit applications and potentially faster approvals, as it boosts your credit score, while making it much easier for lenders to confirm your identity​​ and address. 

2. Keep on top of your financial obligations

Maintaining a solid record of timely payments is essential, as payment history is a critical factor in credit scoring. Credit Karma emphasises that even a single late payment can negatively impact your credit score, potentially for over a year, especially if you previously had a very good or excellent rating​​. Late payments are reported to credit agencies after 30 days, and the mark can remain on your credit report for up to seven years​​. This history is vital for lenders, as it informs them of your reliability and the risk of default, which can be a significant loss for their business​​.

Automated credit processes used by lenders, including credit unions, often reject applications based on poor payment histories. Even if a credit union takes a more personalised approach to lending, a history of missed payments, defaults, and County Court Judgments (CCJs) visible on your credit file can still be detrimental. Keeping your payment history clean is not only about maintaining a high credit score but also about ensuring your financial reputation remains intact for any future credit (and even some employment prospects).

3. Use your credit card borrowing limits wisely

Credit utilisation is the ratio of your credit card balance to your credit limit. For example, if you have a limit of £1,000 and use £300, your utilisation is 30%​​. It’s recommended to keep this ratio below 30% to benefit your credit score, as high utilisation can suggest to lenders that you may be over-reliant on credit and potentially a higher risk​​. 

Credit unions, while often offering a more individualised lending approach, can also consider this factor when assessing loan applications. Managing your credit well by keeping utilisation low reflects positively on your financial reliability.

Metro Moneywise Loans

Choosing a loan product that resonates with your financial situation is crucial. Here’s a snapshot of what we offer:

• Everyday Loan: Ideal for unexpected expenses.
• Aspire Loan: A suitable choice for larger financial requirements with a lower interest rate.
• Premium Loan: Offers the lowest interest rate among our unsecured loan options, ideal for individuals with a good credit score.
• Savings Secured Loan: A low APR of 3% with a borrowing range of £5,000 to £25,000, this loan is secured against your savings with us.
• Debt Consolidation Loan: Crafted to help manage and reduce your existing debts.

Determining how much you can borrow from us isn’t a one-size-fits-all answer because everyone’s financial situation is unique. While the guidelines in this article serve as a solid foundation for understanding your borrowing potential, the best way to gauge the exact amount you can borrow is by considering your individual circumstances. We pride ourselves on supporting our members with a variety of loan options, ensuring we cater to your specific needs. Are you still unsure? Feel free to get in touch with our team, who will be more than happy to discuss your situation.