I have noticed lately the proliferation of cooperative credit union where a member can borrow money at a low interest rate. It is beneficial particularly to the poor members because availability of cash is at hand. However, there is no coop that lends money for a longer term. It is always a maximum of 1 year for the repayment period. I am thinking of organizing a cooperative credit union that would afford members to take housing loan that is payable for more than 10 years. Do you think it is feasible?
I guess you never know until you try. I'd look carefully into the regulatory environment there before committing any serious time or money into such an idea. Lending institutions are heavily regulated here in the US. One thing to keep in mind about those who put money up for others to borrow is that the longer the loan term, generally the more interest the lenders want to charge the borrowers.
I work in a bank and I agree with the term you mentioned - the longer the term, the more interest is charged on the borrower. But on the other hand, there is this thing called value of money where after 5 years, the 100k is not worth 100k anymore. Like our house mortgage which we got in 2001, the installment of $300 is big money but now, after 15 years, that $300 is not that much anymore. In other words, time equalizes the high interest rate pegged on the principal of the loan and as time goes by, you pay lesser in terms of value of money.
Co-operative lending schemes exist here in the UK, and they're a very good option for poorer borrowers. The only issue is that they tend to be locally based, and only lend to local residents, so if there isn't one near where you live you might have trouble finding one that will lend to you. They are also a good option for people looking to invest in them as a lender, as UK law protects your investment up to a certain value. ps. just made a quick internet search and it seems that online co-operative unions exist too, which lend at fairly high rates if someone has low credit score.
Well, co-op lending is going passe in our bank because there used to be co-op in many departments but now the organizers seem to have lost interest. From my conversation with one organizer yesterday, she said that bad debts is hounding their co-op lending so she decided to just quit instead of incurring losses year after year. For my own credit co-op which I started some 20 years ago, I am very selective with the members since bad debts can kill the co-op. We are again open for membership starting January 1.
Credit Unions here generally offer better rates on their products, but just like banks they have better ones and worse ones. They are some of the things you can find when looking at credit unions. Variable rates, some pay interest on all accounts and some don't. it really depends on the credit union you are looking for and the types of services requested. These are the things you need.
Just take note that credit union co-ops here cater to the members only and those members are specifically stated to belong to an industry like public utility drivers or market vendors. Now, with the loans they offer also depends on the charter of their co-op and cannot just lend money for any purpose. What's good in co-ops are their inherent benefit of being tax-free. Yes, they don't pay taxes and even income taxes from the dividends to members are also exempt from the tax.
