Help!! Confused and seeking advice on request to Credit Union for funds.

W

warrendublin

Registered User
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33
Hello,

I am a member of a credit union with Shares of 15,500approx
I have an outstanding loan, never in arrears of 19,000 (it started at 27,000)

I repay a approx 500.00 each month.

I had a credit card bill of approx 2,800.00 and asked the CU if i could get an additional 3,000 from the CU to pay off the credit card bill.

I was told that the CU would not consider advancing this amount until I had paid off half the existing loan - in other words 13,500.

I'm seeking the best course of action here, financially speaking so would hugely welcome any advice.

That said, and from reading on here, am i right in thinking that I can instruct the Credit union to reduce my shares to a particular ratio and use this to reduce my current loan? Is this correct for instance - I ask them to take 10,000 of my shares to reduce my loan to 9,000 whilst leaving 5,500 in shares with them to cover the 9,000 loan? Have I legal right to do this?

Perhaps i'm wrong here!!!

If so, is there an act to which I can point or an area of law that I can use to do this?

Alternatively, is there a way that I can have the credit union accept my request for an additional 3,000 to pay off the credit card and then pay off the Credit union loan.

I repeat, I pay the CU repayments every month, am not in arrears and have been paying down the loan consistently.

Many thanks in advance!
 
In law, the CU can reduce your shares to no lower than 25% of the loan balance outstanding. You can ask the CU to transfer any amount against your outstanding balance but to no lower than 25% of o/s balance. However, you can't make them lend you the money. You should write to the board of the CU and ask them to release €2,800 of your shares in order to pay a bill.
 
Slim said:
In law, the CU can reduce your shares to no lower than 25% of the loan balance outstanding. You can ask the CU to transfer any amount against your outstanding balance but to no lower than 25% of o/s balance. However, you can't make them lend you the money. You should write to the board of the CU and ask them to release €2,800 of your shares in order to pay a bill.
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Many thanks for this really useful information.

OK so i have two choices as I understand it.

1. Write to the CU and ask them to release 2,800 to pay the Credit Card bill

Have they grounds to refuse my application?

2. Write to the CU and ask them to reduce my loan amount by transferring an amount of shares to reduce the balance (but ensuring taht I leave a minimum of 25% of shares to "match" the o/s balance

Again can they refuse the application and on what grounds

If (and I have a suspicion that they will refuse) they refuse either application(s) do I have any recourse to insisting that they have to let me do either 1 or 2?

Thanks a million.
 
Yes. They can refuse you.

Explain to them that when you got the €27,000 loan they had €15,500 as security, so their risk amount was €11,500. Right now their risk amount is €3,500. You are asking them to EITHER release shares so you can clear your Credit Card bill, or TOP UP your loan. In either option their 'money at risk' increases from €3500 to €6300, and you want to know why they would not entertain this given they were happy to risk €11,500 with you already and your financial circumstances have not changed between the original loan being issued and now (if that is the case)

If you are getting nowhere send in a written appeal to the Credit Committee. If that fails, send in a written appeal to the Board. I can't see why they would refuse you. I'd say 99% of credit Unions would love to help you on this one, unless there is something that you are not revealing on this forum. These appeals are covered in the Credit Union act as amended in 2012

Before you send in any appeals, get a personal copy of your credit report from icb.ie and it will help your case if all debts are up to date.
 
Hi again.

It has to be said that many credit unions have rules such as this for 1st time borrowers, i.e. no top ups until half loan is repaid. Experience tells CUs that borrowers who seek to top up before that level is repaid are more likely to become defaulters over time, no offence. Were you relying on the CU to top up your loan? You don't say how long you have been a member and if you are employed. CUs take several factors into account: length of memebership, savings record, employment status and ability to repay. It is possible that one or more of these factors are worrying them.

I served on a credit union board for 15 years and I have never seen a request such as yours, with your numbers, refused and I would be surprised if it even came to the board. As Wysiwyg says, are you disclosing everything here? If so, and I don't doubt you, then you may be dealing with under par staff/management at the CU. If your credit is good, you could consider getting a loan elsewhere to clear your CU loan and move to a more accommodating CU.
 
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Hi again.

Thanks to everyone for their input. I really appreciate it.

Ok to answer some of the points raised.

I am employed In middle management in permanent pensionable employment for 30 years. Full time.

Have A mortgage in joint names just over two years . having moved from a renting position. LTV is 50% at this point.

I should add that income from separate employment (taxed audited etc) pays this loan off monthly.

This is what I can't understand.

I Have never defaulted on a loan. I Have a completely clean credit record.

No skeletons!!!

IIRC I have had a loan before with the CU.

My spouse is also in employment permanent pensionable for almost the same length of time as I. Full time.
Many thanks
 
Hi Warren, in that case I would write to the Credit Committee of CU and ask for a review of the decision. They meet weekly and may be able to decide quickly. Unfortunately, the board may only meet monthly and you may need to pay off the credit card bill before they consider your letter.
 
once again many thanks. I will write and ask for a review of the decision.

However, from reading some other posts on threads here, there is no guarantee that they will or are obliged to amend the decision. So, with that in mind, should the CU refuse to allow me to either

a. "top up" the loan by 2,800
OR
b. withdraw shares by 2,800

then I have another question!!

Providing I keep paying off the loan at the same rate of 500 per month, I believe that when my loan oustanding equals my shares balance at 15,500, I can then tell them to take all my shares as final payment. (Correct?)

If I do this would I be entitled to a a refund of some sort for paying back the loan early (ie would there be interest that I don't have to pay, which has how already factored into my repayments, but now is not required to be paid?)

Or worse still, would I have a penalty for paying the loan back early?!!!

In effect, is there a downside of using my remaining shares to pay off the loan when the loan and my shares become equal?
 
warrendublin said:
If I do this would I be entitled to a a refund of some sort for paying back the loan early (ie would there be interest that I don't have to pay, which has how already factored into my repayments, but now is not required to be paid?)

Or worse still, would I have a penalty for paying the loan back early?!!!
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No. The CU based your repayments on you fulfilling the criteria of paying 500 back each month til it's paid off. If you were to overpay say 1k per month then you would pay less interest. It's just like a mortgage. Overpaying not only shortens the term but also lessens the interest you pay. They do something like charge you interest each day which goes down slightly every month after you pay the 500. Does this make sense ? Have a look at the final post here for how it works for a mortgage loan and it's the same idea.
 
warrendublin said:
In effect, is there a downside of using my remaining shares to pay off the loan when the loan and my shares become equal?
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No downside, you will save on loan interest. The CU is one of the most expensive places to borrow from when you factor in the cost of tying up your funds.
 
If the CU won't budge I would use 14300 shares towards paying off the loan, reducing the shares to €1200 and the loan to €4700. At least you would minimise the interest payable to them.
 
Páid said:
If the CU won't budge I would use 14300 shares towards paying off the loan, reducing the shares to €1200 and the loan to €4700. At least you would minimise the interest payable to them.
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But that's the problem. Such a change in shares/loan would be at the discretion of the CU!
 
Slim said:
But that's the problem. Such a change in shares/loan would be at the discretion of the CU!
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They cannot refuse to reduce the amount of the loan using shares as I specified above. The can refuse to issue a new loan of 3,000 to pay a credit card bill.
 
As far as I understand, the Credit Union has not refused the OP to use shares towards the loan (the OP hasn't asked yet) so we don't know if discretion is an issue.
 
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Hi there,
The CU will allow me a facilitation to withdraw 2800 in shares to pay off the Credit Card.

Apparently under Central bank rules they can't allow me another loan/top up until 1/2 the loan has been repaid.

I asked if it was possible to use shares held to reduce the loan amount outstanding, thereby reducing the interest i was paying on it.

I was told this was not possible until my loan and shares were at parity.

As I see it I now have two options:

1. take out the shares and pay off the CC (and clearing that debt)

2. withdraw 3,500 in cash using my CC to establish parity with my loan/shares and wipe out the CU loan in it's entirety.

I'm paying over 100.00 per month in Interest on the loan at this time. On the CC debt i'm paying

Is there a calculator anywhere which would show me how much interst i'd be paying for 6 months if i was to exercise the 2nd option, based on a CC Interest rate of 18.4%
 
warrendublin said:
Hi there,
The CU will allow me a facilitation to withdraw 2800 in shares to pay off the Credit Card.

Is there a calculator anywhere which would show me how much interst i'd be paying for 6 months if i was to exercise the 2nd option, based on a CC Interest rate of 18.4%
Click to expand...

Good for you! I don't have a link to a 'calculator' but you would pay approx. €53 pm on the cash advance(no grace period) and save €100 int payment to CU. You will lose any insurance etc but many here don't really rate that anyway. There is a lot to be said for being debt free. Good luck anyway, Slim.
 
Thanks for all the advice everyone.

OK, I've pretty much decided on the following course of action:

1. Pay off the CU loan via a 3,500 withdrawl from my CC (interest rate 22.9%) - this will equate loan to shares and finish the CC loan

2. when 1 goes through, I balance transfer my CC balance to a new CC which has an offer of 0% interest on balance transfers for 6 months on the new CC.

3. Pay off the new CC balance over 6 months.

Is there a problem in doing it this way that i haven't foreseen??

PS - I have one CC with a NIL balance, and another credit card with 2,800 on it - which card should I use to withdraw the cash and then balance transfer (ie is there an advantage of one over the other to use?

As ever many thanks.
 
One point - paying off your loan with a credit card will mean paying a cash advance fee, which is of the order of 1-2%. Not major if it means clearing up your debt position but just something to note.
 
Hi Rob

many thanks - I plan to withdraw the cash from ATM(s) and hand it to the CU? Is this more cost effective than using the Card?
 
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