by Mel Cooke, Freelance Writer

Karen, a 33-year-old medical technologist, joined a credit union some six years ago, switching most of her then relatively small savings from the commercial banking system. She did so in order to access low interest loans, but soon realised that it was also a way to do medium to long-term savings.

"I really don't know how the credit union makes money, because the interest rate is so low, so when I pay back a loan it is not really a strain. But even more than that some of the repayment goes to shares, so I am building up my savings," she said.

It was not long before she figured out that if she paid off a particular loan quickly, building her savings at the same time, then had something that could be sold for nearly as much as she paid for it in the first place, then she was coming out on top of the game. So Karen did just that with a Toyota Corolla motor car which she still has, owning it free and clear, while seeing her cash savings increase.

"I can sell it at any time, but why would I do that right now? It is serving me well and the mechanic told me that the value of those cars does not go down too quickly," she said.

Leon has found another way to work the credit union system to his advantage. He first saves as much money as he can, then borrows the same amount of money as he has in the account, which stands as security for the loan. He therefore does not need to buy something that will be held as security; the money is his to do what he wants.

And what he does is to put it in a high interest yielding account, where it stays while he is paying off the credit union loan. At the end of the period he has the money in the credit union, plus the additional savings that some of the repayment goes to, as well as the money in the other account, plus interest.

"I have done it twice over the last six years, and I am working on another one," the 43-year-old said.

As a heavily service oriented financial institution, the credit union offers shares to its members through share accounts and it is by investing in these over time that the benefits are realised.

"When I tell people I take a loan to save they don't really believe sometimes, but you have to work at it and be patient and it really works out," Leon said.