FROM banks with high costs and strict rules to loan sharks who hand over cash quickly but charge huge fees, people in debt can feel there is no escape.

But there is an answer to ensuring you remain in long-term financial health – and it comes in the form of credit unions. Credit unions are co-operatively owned finance institutions that can provide exactly the same services as your average bank, but don’t have high-flying managers to pay and don’t charge exorbitant interest rates.

The London Capital Credit Union, based in Islington, is the oldest example of an increasingly popular way to manage your money.

Originally established as the Hornsey Credit Union in 1960, its background stems from bigotry.

Chief executive Martin Groombridge explains: “The Credit Union was started by families who had moved from the Caribbean. Some people had been to a high street bank to set up accounts and were told by the manager they ‘didn’t want your sort in here’.

“Credit unions were well established in the Caribbean, so they decided they did not have to give their custom to institutions with such awful views.”

Using the Ferme Park Baptist Church in Hornsey as a base, the credit union offered financial help to hundreds of people and continues to do so today.

Now combined with other credit unions, it boasts over 16,000 adult members and holds £19million in savings.

Mr Groombridge said: “Most of our members had no savings at all when they joined and they do now, which shows how well our system can work.”

Though credit unions have been around for 50 years, they had played a similar role to building societies which were better known and had a high street presence. After laws changed which allowed them to demutualise, they increased rates and took risks.

Mr Groombridge explains: “They began acting like banks, because that is what they were in all but name. This meant taking greater risks to increase bonuses. They were washed away in the 2008 crash.” It led to a rise in credit union accounts.

Mr Groombridge said: “Any member can ask for a loan, and it can be of any size. Banks will not lend under £2,000, but say you only want to replace a broken washing machine and it’s £400? Why should you have to borrow more than you need and pay more to give it back?”

The union offers help managing expensive debts. Some borrow a sum to get credit card companies or other high interest loaners off their backs.

They pay the union at a rate they can afford. Coupled to this, a rule with the loan is that you must pay a minimum of £1 a day into your savings account while paying back the loan.

That money is then released to you once the loan is complete as a windfall. On top of that, the debt only accrues a small amount of interest. If you borrowed £1,000 and paid it off over a year, the fee would reach £67.

Martin Groombridge

Mr Groombridge said: “It helps people who are just managing their debts, servicing the interest but never getting away from it. Using a credit union loan means you can cut the amount you pay off often by half.”

The Union’s work means members are simply less likely to fall into financial trouble.

Mr Groombridge said: “Our main goal is to encourage people to save. It means if something unexpected happens they don’t go into debt.”

Other loans can be used for home improvements such as double glazing or replacing inefficient boilers. This can help cut down outgoings too, giving the union member fewer overheads caused by fuel poverty, for example.

The proof of whether a credit union works is illustrated by the numbers who use them today. There has been a growth in membership of 420 per cent in the past decade, and savings have increased by 775 per cent.

Mr Groombridge added: “The more people who join, the more people who save with us, the more we can help benefit the community we live in.”