Borrowers 'should shop around'

The Citizen's Advice Bureau says credit unions can be a good option

No matter how good you are at sticking to a budget, Christmas is a time of year when most people get a bit carried away with their spending.

For some though, the challenge of forking out cash for all the food and presents leaves them little choice but to try to get a loan.

This year the Citizen's Advice Bureau is warning people who want to borrow to shop around.

Instead of turning to things like payday loans they're recommending people investigate whether they're eligible for a credit union loan.

At the moment less than 1% of people in England use credit unions, with the figure only a little higher for the rest of the UK.

Credit Unions are small non-profit organisations set up by people with something in common.

Maximum interest

In most cases, they live in the same town or work in the same industry. Their main purpose is for saving and borrowing.

They used to have a rule where they would only lend to people who were already members. But now some of the bigger ones will consider giving people loans even if they've not saved any money with them.

The Citizens Advice Bureau say they're often a better option than taking money from a doorstep lender or a payday loan.

Tina's a mother of three who lives in East London. Two years ago she built up a debt of more than £1,000 after taking out a loan from a doorstep company.

She said: "I needed money to buy Christmas presents and other things like birthday presents.

"All you had to do to was show them your tenancy agreement. I didn't read all of the small print."

Saving encouraged

Like many, she had never heard of credit unions and only went to her local one when a friend tipped her off.

Credit Unions don't just give money to anyone though. They need to make sure they'll get back what they loan out.

Many people get carried away with spending over Christmas

They also heavily encourage anyone who borrows from them to then start saving with them.

Commercial companies we spoke to stressed how they offer far greater flexibility than credit union loans - with many offering larger sums of cash.

They emphasise they make repayments affordable for customers if they don't miss payments.

A further problem with credit unions is that not everyone can take advantage of them.

If there isn't a credit union set up in your local town the chances are slim that you'll be able to use one.