HI-Scot Credit Union are launching a campaign across the Highlands and Islands so that people are more aware of the cost of borrowing.
The warning follows a revelation that some High Street banks charge more than 800,000% APR for unauthorised overdrafts.
Hi-Scot Credit Union has been operating since December 2006, and has experienced a healthy growth rate in that period. 2,000 members of the community have joined and are actively benefiting from the service, which has seen £2.5 million worth of low cost loans issued.
David Mackay, General Manager of HI-Scot Credit Union, said: "At a time where everyone is feeling the pinch it seems absurd that some banks can justify excessive interest rates. A combination of unauthorised overdraft rates at this level and the massive rates charged by payday loan companies often lead to relatively small debts becoming unmanageable simply because of additional fees and charges. There is no cap on the maximum APR that a Bank or Payday loan provider can charge. However the rate of interest a Credit Union can charge is capped at 2% per month (around 26.8% APR) and actual rates are often much lower"
Cath King, policy manager at The Highland Council said: "The Highland Council is working in partnership with the HI-Scot Credit Union to encourage people who live and work in the Highlands to consider the Credit Union as a more affordable source of credit than high interest lenders. The terms and conditions of loans from the Credit Union are presented in a very straightforward way which makes it less likely to get into the pitfalls of hidden clauses that often catch people out."
To find out more about the Credit Union For Western Isles and Highland go to -
www.hi-scot.com