Credit Union --- best for loans --- what a joke!

[ClubMan]

Originally Posted by skydancer

Nobody seems to take into account the Divedends and the interest rebate paid back into your account at the end of the year.

They do. But the interest rate rebate usually just discounts the cost of borrowing slightly below the maximum of c. 12%+ APR while the dividends payable these days are usually around 3% gross at best and, as such, never going to make up the difference between how much could be saved by simply using the money in shares to reduce the amount that the individual needs to borrow.

[Crugers]

Originally Posted by Clubman
Maybe the requirement that CUs quote APRs on loans is a recent one?

Fairly recent, as and from, appropriately enough, Apr1 (2005), all CU's stopped using Promissory Notes for loans and began issuing Credit Agreements in a format approved by IFSRA that must contain the APR calculated in a manner defined by law (which does not refer to shares/deposits).

Originally Posted by Clubman
...requiring people to keep money on deposit or in shares while borrowing...

While some CU's impliment these requirements, it is changing. In the thread about 'the future of Irish CU's' Brendan referred to his CU fastracking membership requirements to facilitate loans to members.

Originally Posted by Clubman
You mean the law governing CUs specifically?

Yep! CU Act,1997 as amended...

Originally Posted by Clubman
...not clearly explained to the borrower, then there certainly is a potential for a rip-off...

It can be impossible to clearly explain somethings to some people. Sometimes it is the fault of the sender, sometimes the receiver, sometimes both! However since CU's are not-for-profit organisations I don't see the communication failures as a mechanism set up to rip off members.
The Credit Agreements in CU's have cooling off clauses the same as other financial institutions. They list all the details including APR's, repayment amounts, total cost of credit, number of repayments, start date etc...

Originally Posted by Clubman(in another thread)
The fact that somebody doesn't ask/check beforehand means that they cannot claim to have been ripped off after the fact.

[ClubMan]

Originally Posted by Crugers

However since CU's are not-for-profit organisations I don't see the communication failures as a mechanism set up to rip off members.

The co-operative nature (arguably somewhat eroded in recent years) of an organisation such as the CU movement is no defence against deliberate or accidental rip-offs. In any case most CUs branches and the ILCU employ full time staff so hiding behind amateurism is not on any more. Just look at the ill fated ILCU centralised computer system fiasco or the insistence by command central that CUs buy insurance through a single provider (which caused a few CUs to secede from the ILCU)? Or the way in which the CUs have colluded for years with members to shield funds from DIRT on deposit interest or income tax on dividends? All cases where CU members (including myself) and taxpayers were ripped off to the tune of millions either deliberately or through ineptitude.

I agree that consumers, including CU members/customers, have a responsibility to apprise themselves of the details of any agreement that they sign up to. The problem is that even those (such as many AAM contributors) who are well averse in matters of personal finance find it difficult or impossible to establish certain facts (such as the effective APR on loans taking into account the requirement to keep money in shares/on deposit).

[Crugers]

...no defence against deliberate or accidental rip-offs...

Thats right! That's why I expanded on how members could be entitled to interest free loans in those cases where CU's knowingly charge or accept interest at a rate greater that 1% per month.

...CUs have colluded for years with members to shield funds from DIRT on deposit interest or income tax on dividends...

CU deposit accounts were not liable to DIRT until January 2002, CU's applied the law and didn't, until then, deduct DIRT. You wouldn't expect them to do otherwise? Now that these accounts are liable to D.I.R.T. it is deducted and remitted to the coffers of the state.
Income tax on dividends was/is the responsibility of the individual member. If a member did/does not declare their dividend they are breaking the law, not the CU.
What would you have CU's do?
Is Ford Motor Company guilty of colluding with speeding motorists in Ford cars? Are Aer Lingus responsible for weekend travellers who over shop in NYC and import without paying duties?

...taxpayers were ripped off to the tune of millions either deliberately or through ineptitude...

Since CU's are not responsible for members tax returns or the accuracy of the declarations made theirin they can hardly be implicated in ripping off taxpayers either deliberately or through ineptitude.
With regards to the centralised computer system I can only agree that it was the most spectacularly inept and expensive cock up that the League had............ to date. (There's optimism for ya! )
Regarding insurance via 'control central'. Yes some CU's with buying power and resources found they could negotiate terms elsewhere. The League objected and lost in court. More CU's found they couldn't get better terms elsewhere and continue to use the services of the League. Market forces prevail!

...difficult or impossible to establish certain facts (such as the effective APR on loans taking into account the requirement to keep money in shares/on deposit)...

Darag has a calculator that allegedly works out an 'effective APR' at
http://www.geocities.com/dara_gallagher/index.html

[levelpar]

Originally Posted by johnnybegood

Hi just enquire about a credit union loan for 2k and this is what they qouted:

12 mths (52 weekly payments)

total payment €45 (split capital €38.46 and balance €6 odd interest)

Hi , As a credit union member for many years, I have been charged interest ONLY on the reducing balance. Unless I'm mistaken,you imply the interest is €6 odd every week. Before everyone jumps on the bandwagon in thrashing Credit Unions, remember, years ago when Banks were not so quick to hand out money ,the only recourse ordinary people had to money for holidays,household purchases.etc,was the local credit union where one paid what one could afford and learned to save a little each week WITHOUT all sort of conditions imposed as the banks do. Also if things were tight one week ,no one came to haul you to court or take over your house (like the banks would)..Having said all that , It's my opinion that credit unions have lost their way baa baa baa. Those in charge are wannabe bankers , are not as community friendly as they use to be and now plough profits into bigger and bigger premises with all the trappings of Banks. They even have the cheek to state "no hidden charges". Thanks for nothing . They have forgotten that the credit union is owned by the community and its not us and them which it is beginning to look like.

[mell61]

I have to agree with Frando totally.
In the 1980's the banks were a closed shop, lending only to those who didn't need it!
My family was in a position where we needed a short term loan quickly, my mum and sis both working full time couldn't get a short term loan (as i recall for £500) even though both were in full time employment and had been with the banks for umpteen years.
I was still in school and was able to walk in and get the money straight away based on my savings!
So for me the CU have been a financial backbone of this country and in many cases funded the Celtic Kitten! When the downturn comes I suspect there will still be nurturing their customers when the banks are hounding people for money!

[levelpar]

Hi , Just found News and Views ,Autumn 2005 edition,.Car Loan 6.99% (apr 7.22%). Likewise Christmas Loans same . New Household Loans 7.75% (APR 8.03%). Educational Loans 6.6% (apr 6.80%) They also advertise LIFE SAVINGS INSURANCE at no extra cost to members and LOAN PROTECTION INSURANCE at no extra cost to members. The rates were up to Dec. 05

[Froggie]

The easiest way of looking at the cost of a loan is to compare the actual money repaid. The credit union charges interest on the outstanding loan ballance, and as long as you repay each week it is a great way of getting finance. The Bank on the other hand charge you interest on the full €2000 for the full term of the loan.

[Brendan Burgess]

Froggie

That's just nonsense and nonsense which is often put out by the Credit Unions.

Most lenders, including credit unions, charge interest on a reducing balance basis. But that doesn't matter too much. What matters is the Annual Percentage Rate. This is the standardised way of comparing the costs of loans. You can compare different amounts over different periods using this single standard rate.

There are some problems with APR, the most significant of which is that the Credit Unions do not factor in the money earning 2% on the share account into the calculation.

I did not check your interpretation of the original post as I believe that the original poster has got it wrong or his Credit Union has misquoted him

Brendan

[extopia]

Originally Posted by Froggie

He's paying €45 per week for 52 weeks (2 Years) so total repaid is €2,340.
The original loan was €2000 so interest is €340.

Interest as percentage = (340/2000)x100/2 = 8.5%.

Unfortunately for this calculation, 52 weeks is not 2 years.

[Froggie]

extopia,
My mistake, thanks.
I just checked out my local CU web site and got the following.
€2000 borrowed at 6.5%, 52 repayments of €39.83, total repayed is €2071.16.
Thats interest of €71.16 which works out at 3.558% of €2000.
I will say it again, CU charge interest on the outstanding loan balance. I dont think Brendan is correct in saying that most lenders do the same.
Can someone who works in a bank shed some light on this issue?

[extopia]

We're going over old ground here. The posts above are clear about why you would use 1,000 rather than 2,000 for a rule-of-thumb calculation such as this. And yes, the standard practice is to charge interest on the outstanding balance, rather than the originally borrowed amount.

[raindog]

just received my health services credit union yearly accounts summary without going into too much detail
personal loans APR 10.4%
car loans APR 7.2%
and i guess these figures do not include interest rebate.
there could be a case for CU to simplify their loan calculations though.

[RichInSpirit]

Originally Posted by johnnybegood

Hi just enquire about a credit union loan for 2k and this is what they qouted:

12 mths (52 weekly payments)

total payment €45 (split capital €38.46 and balance €6 odd interest)

I have prepared this. On that basis the interest is 30%

TERMLOAN 30% PAID BALANCE€ € € €1 2,000 50.00 195.00 1,855.00 2 1,855 46.38 195.00 1,706.38 3 1,706 42.66 195.00 1,554.03 4 1,554 38.85 195.00 1,397.89 5 1,398 34.95 195.00 1,237.83 6 1,238 30.95 195.00 1,073.78 7 1,074 26.84 195.00 905.62 8 906 22.64 195.00 733.26 9 733 18.33 195.00 556.59 10 557 13.91 195.00 375.51 11 376 9.39 195.00 189.90 12 190 4.75 195.00 - 0.36

Am i missing something here how ridiculous is that!!!!

Same info based on 18 mths works out at 20.5% !!!! RIP OFF

TERMLOAN20.50%PAID BALANCE€€€€1 2,000 34.17 130.00 1,904.17 2 1,904 32.53 130.00 1,806.70 3 1,807 30.86 130.00 1,707.56 4 1,708 29.17 130.00 1,606.73 5 1,607 27.45 130.00 1,504.18 6 1,504 25.70 130.00 1,399.88 7 1,400 23.91 130.00 1,293.79 8 1,294 22.10 130.00 1,185.89 9 1,186 20.26 130.00 1,076.15 10 1,076 18.38 130.00 964.54 11 965 16.48 130.00 851.01 12 851 14.54 130.00 735.55 13 736 12.57 130.00 618.12 14 618 10.56 130.00 498.68 15 499 8.52 130.00 377.20 16 377 6.44 130.00 253.64 17 254 4.33 130.00 127.97 18 128 2.19 130.00 0.16 340.16

PLEASE SOMEBODY CORRECT ME IF I AM WRONG WITH MY CALCUALTIONS CAUSE THIS JUST SHOCKS ME. the most vunerable of people borrow from the credit union and this is the rates they charge. Then i read in the paper that ifsra have said they are better value for loans then anybody else!!! What a load of BS!!!

By the way the qoute was provided by west cabra credit union SHAME ON YOU!!!!

I was just browsing here and may have an answer to the op's observation.

Here goes. Most lenders quote repayments on a level repayment basis, but historically a credit union may have quoted a level principal figure and the starting interest rate after which the principal payment stays even but the interest decrease every week as the outstanding principal reduces.
I didn't check out the op's figures for this but it could be the case.

[RichInSpirit]

Just trying out the figures now.
€38.46 x 52 = €1999.92 principal.
Starting weekly interest €6
Yearly interest reducing balance €6x52/2 = €156
€156/€2000 is 7.8% interest.

[ajapale]

You realise the last post in the thread is over 5 years old?

[RichInSpirit]

Originally Posted by ajapale

You realise the last post in the thread is over 5 years old?

I do.