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

Discussion in 'Credit Union issues' started by johnnybegood, Oct 12, 2005.

  1. ClubMan

    ClubMan Frequent Poster

    Posts:
    43,745
    Re: Credit Union --- best for loans --- WHAT A JOKE!!

    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.
     
  2. Crugers

    Crugers Frequent Poster

    Posts:
    444
    Re: Credit Union --- best for loans --- WHAT A JOKE!!

    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).
    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.
    Yep! CU Act,1997 as amended...
    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...
     
  3. ClubMan

    ClubMan Frequent Poster

    Posts:
    43,745
    Re: Credit Union --- best for loans --- WHAT A JOKE!!

    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).
     
  4. Crugers

    Crugers Frequent Poster

    Posts:
    444
    Re: Credit Union --- best for loans --- WHAT A JOKE!!

    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.

    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?
    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!
    Darag has a calculator that allegedly ;) works out an 'effective APR' at
    http://www.geocities.com/dara_gallagher/index.html
     
  5. levelpar

    levelpar Frequent Poster

    Posts:
    354
    Re: Credit Union --- best for loans --- WHAT A JOKE!!


    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.
     
  6. mell61

    mell61 Frequent Poster

    Posts:
    359
    Re: Credit Union --- best for loans --- WHAT A JOKE!!

    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!
     
  7. levelpar

    levelpar Frequent Poster

    Posts:
    354
    Re: Credit Union --- best for loans --- WHAT A JOKE!!

    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
     
  8. Froggie

    Froggie Frequent Poster

    Posts:
    197
    Last edited: Nov 27, 2006
    Re: Credit Union --- best for loans --- WHAT A JOKE!!

    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.
     
    Last edited: Nov 27, 2006
  9. Brendan Burgess

    Brendan Burgess New Member

    Posts:
    26,315
    Re: Credit Union --- best for loans --- WHAT A JOKE!!

    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
     
  10. extopia

    extopia Frequent Poster

    Posts:
    3,110
    Re: Credit Union --- best for loans --- WHAT A JOKE!!

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

    Froggie Frequent Poster

    Posts:
    197
    Last edited: Nov 27, 2006
    Re: Credit Union --- best for loans --- WHAT A JOKE!!

    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?
     
    Last edited: Nov 27, 2006
  12. extopia

    extopia Frequent Poster

    Posts:
    3,110
    Re: Credit Union --- best for loans --- WHAT A JOKE!!

    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.
     
  13. raindog

    raindog Registered User

    Posts:
    41
    Re: Credit Union --- best for loans --- WHAT A JOKE!!

    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.
     
  14. RichInSpirit

    RichInSpirit Frequent Poster

    Posts:
    433
    Possible answer to question here

    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.
     
  15. RichInSpirit

    RichInSpirit Frequent Poster

    Posts:
    433
    Figures

    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.
     
  16. ajapale

    ajapale Moderator

    Posts:
    7,677
    You realise the last post in the thread is over 5 years old?
     
  17. RichInSpirit

    RichInSpirit Frequent Poster

    Posts:
    433
    I do.