Capital sources: Credit unions

Many trade organizations, large companies and labor unions have established credit unions to assist employees with saving and borrowing. What makes a credit union different from a bank or savings and loan? Credit unions are not-for-profit. They exist to provide a safe, convenient place for members to save money and to get loans at reasonable rates.

Credit unions loan money only to their members. Members are bound by a common bond: their occupation, place of work or residence, or affiliation with a religious group, union or other association. To be eligible for membership, you must share that bond. Since a credit union is familiar with its members' personal and job histories, the lending process is somewhat easier.

Some credit unions offer short-term business loans, but most concentrate on auto, boat and personal signature loans of up to $10,000. An unsecured signature loan would be granted with a favorable debt-to-income ratio. To determine debt-to-income ratio, add up all your monthly debts, such as mortgage and car payments. Divide that total by your monthly pretax income. If your debts totaled $1,700 and your monthly gross income (pretax) was $5,500, you would have a debt-to-income ratio of 31 percent.

What you'll pay
If you took out an unsecured, 36-month loan for $5,000 with a 12 percent interest rate, your monthly payment would be $166 and you would pay $978 in interest by the end of that term.

Want to join a credit union? Contact family members to see if you can join through their affiliations. You can also contact your occupational, fraternal, religious and alumni organizations to see if they have a credit union you can join.