12% interest on Credit union

Discussion in 'Credit Union issues' started by 5Times, Mar 6, 2007.

  1. 5Times

    5Times Frequent Poster

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    91
    Hi,

    Myself and the wife needed to borrow 40k from the credit union to buy our house and get some bits etc, we had 15k in savings.

    We are paying back 640 euros per month, I cant remember the term but does 12% sound right. Loan sharks give better rates.
     
  2. quinno

    quinno Frequent Poster

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    501
    Have a look at www.ifsra.ie

    Then you can make a judgement on rates....
     
  3. BrenG

    BrenG Frequent Poster

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    171
    Why not go to a mortgage lender? Obviously if inly 40K neded you must have extensive equity in the property.
     
  4. HMD

    HMD Frequent Poster

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    10
    you only pay interest on the ammount you owe with the credit union, so over the life of the loan you'll save.
     
  5. Miles

    Miles Guest

    Just this week I secured a loan with the Credit Union, 35K. The interest rate on this loan is 7.0%.

    I have no affliation with the Credit Unions.
     
  6. River

    River Frequent Poster

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    153
    not necessarily. They offer both standard APR and also a reducing repayment option. The latter meaning you will pay back a higher amount for first number of years and a decreasing amount in later years. This repays principal quicker and means you are charged less interest.

    From your figures 5times, I would estimate your repayment term as 8 years. If this is correct, then you are getting charged 12%, which is extremely high and uncompetitive. If this is not the term of the loan (if term of loan is longer than 8 years) then you may be on their reducing repayment option.

    Regardless or repayment method, if you are being charged 12% I would advise you to source another lender as together with opportunity cost of any money on deposit together with possible forced share contribution, the real cost of this loan is even higher than 12%.
     
  7. Crugers

    Crugers Frequent Poster

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    445

    100% True!

    At 12% interest rate you are at a "loss" from day one! Although CU's are by law allowed to charge a maximum of 12%, those that do are in the minority and extremely bad value (unless you can't get credit elsewhere for less).


    I think you mean "Fixed" repayment amounts where as time goes by the portion of principal in the fixed repayment increases as the interest due decreases.


    So why did you take the loan from the Credit Union?

    I am a member of a Credit Union and a voluntary director of a Credit Union.
     
  8. irishpancake

    irishpancake Guest

    are you mad 5times :eek:

    Paying 12% to a CU which presumably still has your €15k as so-called "collateral", giving you a negligable return on it.

    Why don't you borrow €25k from either Tesco or Halifax, and just pay the CU loan down to €15k, and use your €15k in shares to clear the debt with the CU.

    The figures from Tesco Calculator are:

    €491.04 p/month over 5 years (60 months) for €25k, no repayment protection(waste of money).

    The figures from Halifax Calculator are:

    €494.88 p/month over 5 years (60 months) for €25k, no repayment protection(waste of money).

    The Tesco figure above is based on a fixed rate of 6.9% APR (may have changed as offer was to end Feb 28th :( .

    The Halifax figure is based on 7.2% APR fixed, and is still available AFAIK.
     
  9. darag

    darag Frequent Poster

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    457
    This is a meaningless claim. All financial institutions calculate interest on "the amount you owe".

    Did ye need the 40k on top of the 15K or 40k in total? In other words, could ye have just borrowed 25k and used it with your 15k of savings?

    What is the period of the loan? Looking at your figures it looks like 8 years?
     
  10. ontour

    ontour Frequent Poster

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    1,039
    5Times has not asked any question in the original post, they have merely pointed out that they are probably paying a high interest rate and obviously did no research regading a significant financial decision. In the spirit of their post I would like to declare that I bought a bottle of water in Dublin airport for three euro !!

    Maybe 5Times is a disgruntled mortgage broker or lender...check that IP address Clubman ;-)
     
  11. Brendan Burgess

    Brendan Burgess New Member

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    26,990
    Hi ontour

    He has asked a question. Like a lot of people, he has borrowed money from a credit union, assuming that credit unions are cheap. He is now reviewing his position and is surprised to see that he is paying 12%. He seems to be checking with the readership of Askaboutmoney if this is correct.

    I don't see any need to check the IP address.

    Brendan
     
  12. Spondulicks

    Spondulicks Frequent Poster

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    85
    The credit union is like any lender in that it offers loans on terms that suit it . There is a degree of mutuality about it : if it makes money this pays dividends or covers bad debts. If you are a member you can influence the rates it charges by attending the AGM and running for office.
     
  13. 5Times

    5Times Frequent Poster

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    91

    Whats an IP address, and how did i get one, can i get the internet on a floppy disk.

    Your right I did very little research into it, my bad, now im paying for that mistake, I've the loan now but I think it should be highlighted more in credit unions that the interest is 12%, in the small print of the final contacts its mentioned but I'd love to know how many people worse off than me miss this little gem of information.

    The only comfort I have is exactly what irishpancake suggested, thats the reason I "asked about money". Thanks for the replies guys most of you have been great..
     
  14. suntot

    suntot Registered User

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    45
    5Times I think the interest rate varies with every credit union, I have a loan with my credit union at 6.95% which is unbeatable value in my opinion. They are also a lot more accommodating than my bank, allowing me to choose my repayment term based on what I can afford to repay per month. Don't tar all credit unions with the same brush. And it's always worth shopping around before getting a loan
     
  15. BrenG

    BrenG Frequent Poster

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    171
    I still think you should approach a mortgage broker or lender. Why continue to pay 12% when you have viable alternatives?
     
  16. ontour

    ontour Frequent Poster

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    1,039
    5Times, although this has probably cost you some money, the positive thing is that you are not locked in to the credit union with this loan and can pay off the loan at any stage without penalty..so a trip to the financial best buys section can still be beneficial to you
     
  17. Margie

    Margie Frequent Poster

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    161
    The credit unions' interest rates may be high but they have fantastic advantages over any bank.

    You can pay off your loan in full at any time without penalty.

    my repayments are €50 per week. sometimes if i can afford it i pay €100 per week which keeps me in advance, reduces the interest and my loan will be paid off quicker - you won't get that lee way in any bank

    Also most credit unions are not logged with the Irish Credit Bureau which means that if you have a bad credit record with a bank chances are the credit union won't turn their back on you

    also you can get a top up on your loan at any time eg. at Christmas or for a holiday etc.

    The credit unions in my opinion treat people very fairly and have a very down to earth system for the ordinary worker. the banks don't care who or what you are - you are simply a number.
     
  18. CCOVICH

    CCOVICH Frequent Poster

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    8,864
    Plenty of bank loans allow you to do this too.

    Agreed in this case-that sort of flexibility is useful, but should not encourage people to reduce their repayments for an extended period of time and thus extend the term of the loan and the overall interest payable.

    That situation is changing and maybe for the best.

    Yes, but maybe people shouldn't habitually borrow to finance such short-term expenditure (unless they can pay it back quickly). The recent Primetime show on debt illustrated why this is a bad idea.

    Yes, but some of their policies are just too fair for their (and their members) own good.
     
  19. ClubMan

    ClubMan Frequent Poster

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    43,919
    Same with most variable rate loans from other lenders.
    They make it easy to get into debt? Super!
    CU's have arguably not treated their customers/members well in the past by blowing millions (€34M I believe?) on an ill fated centralised computer system (engaging at least three sets of consultants along the way before canning the project), by not making clear the total cost of credit (including the cost of maintaining money in deposits/shares while borrowing), by operating a monopolistic approach to the insurance products that they sold, by (in some cases) not using appropriate prudential oversight to their lending practices putting certain CUs in danger of collapse etc. They also haven't treated the wider public well by facilitating tax evasion by members by stalling on the overhaul of the tax rules applicable to CU accounts. It would take a lot of down to earthedness to overcome those issues in my opinion!
     
  20. BrenG

    BrenG Frequent Poster

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    171
    I think that if you shop around you will find that almost all of the major Banks offer the same services for lower rates (except of course the Credit Bureau record). Not that I'm making a case for the Banks but they are operating in a competitive market and are much more flexible than people think.