'Save as You Borrow' is offered by many credit unions. Alongside your loan repayments, a small amount goes into a savings account in your name. By the time your loan is paid off, you've built up a pot of savings without having to do anything extra.
If you've landed here, you've probably just been introduced to credit unions for the first time and noticed something that doesn't appear with most lenders: the idea of saving while you're still paying back a loan.
'Save as You Borrow' is one of the things that makes credit unions different from other lenders. Most people who borrow through a credit union come out the other side with savings they didn't have before - building a financial cushion without having to think about it.
How does it actually work?
When you take out a loan with a credit union, you also save alongside your loan repayments. The savings go straight into a regular savings account, in your name, with the credit union.
How much will I save?
The minimum amount required to save differs between credit unions, but typically the amount can be as low as £2 per week. You can always choose to save more than the minimum amount if you want to. The credit union will tell you the amount up front, before you accept the loan.
Can I access the savings during the loan?
Usually not in full. Most credit unions hold the shares as security against the loan until it's repaid, or until your shares balance is higher than the amount you still owe. Some credit unions allow limited withdrawals; the credit union you apply to will explain their specific rules.
What happens to the savings when the loan ends?
Once the loan is paid off, the money is yours. You can withdraw it, leave it in your savings account, or use it however you like. Many members choose to keep saving from that point on as they have developed the habit of saving regularly.
Will I earn interest on the amount I’m saving?
Credit union shares accounts usually pay a dividend rather than a fixed rate of interest. The dividend isn't guaranteed. The rate is decided each year at the credit union's Annual General Meeting (AGM) and depends on how the credit union has performed.
Some credit unions also offer other savings products alongside the regular shares account, and these may pay a rate of interest (AER) instead of a dividend. Each credit union’s website will have more information about this.
What to do next
Look out for "Save as You Borrow" or a similar phrase on the loan offer from any credit union you apply to through NestEgg. The savings amount will be shown alongside your repayment.