Lauralashes
Registered User
- Messages
- 24
Hi there,
Just wondering if someone could help me with this - Im applying for my first CU Loan, I have 650 euro shares so was looking for 1300 euro as a loan. The representative advised that the repayments would be 100 euro per month for 18 mths. The Loan rate is 9.95 %.
Does €500 interest over the 18 mths on €1300 seem quite high?
Thanks,
Laura
What is it then?As other posters have mentioned, the €500 over the €1,300 is not interest.
c. 5% interest is not bad. I haven't seen a CU offering that sort of rate on general loans in a while.My CU will require payback of €1,363 for a €1,300 loan over 52 weeks.
2.6% is not equal to 5% so how do you work that out? Normally if the cost is 5% and you also have to keep shares lodged at a dividend of probably 1% or thereabouts then the effective cost of borrowing is going to be (sometimes significantly) higher than 5%.Interestingly they also offer loans at 5% interest fully secured on my shares, so if I needed say €1,000, I'd only have to repay €1,026, cheap enough.
@ Clubman - your crude calculations of interest rates are way off and should, ideally be removed from the thread as they will only serve to confuse those seeking advice. You seem to be unaware as to how interest is calculated on reducing balances and the effect this has on the overall costrat credit
.
@ Milleforbes I'm not sure what you are referring to I'm afraid. There is no doubt in my mind that the OP's figures are incorrect, hence my suggestion for the OP to get the pre contractual information sheet.
Why not point out where I went wrong so that we can all learn something? If I borrow €1300 and pay back €1363 over a year then the effective rate is surely c. 4.8%? Do you get a different result?@ Clubman - your crude calculations of interest rates (in post #8) are way off and should, ideally be removed from the thread as they will only serve to confuse those seeking advice. You seem to be unaware as to how interest is calculated on reducing balances and the effect this has on the overall cost of credit.
CU customers also have certain rights under prevailing CU legislation. It's not always clear which takes precedence - the law or the loan agreement/contract. Individuals need to make up their own mind what is best for their situation. What the CU may recommend may not always be in the customer's best interest. I was making some suggestions that might help the original poster and others. It's up to them to weigh this up along with other options. I don't have any vested interest in this context.There has been some good and some shockingly bad advice posted on this thread.
First of all, no member has the right to dictate terms to the credit union. Members who sign a loan agreement/contract and then immediately insist on changing the terms as Clubman suggests will destroy their credit line in the credit union.
On of the fundamental differences in CU's v banks is that a CU will often engage in "character" lending - taking a member at his/her word when they sign the agreement. Once you get a reputation for not keeping your word, your chances of getting future credit is severely damaged.
I borrow €1300 and pay back €1363.96.When you amortise €1300 over 52 weeks @9.5% interest, the payments are €26.23 per week i.e. €1,363.96. Total cost of credit is €63.96.
Thats a long way off 4.8% and I think that post 8 needs to be removed/amended as its very misleading!
Yes, CU's are striving to improve the financial literacy of all our members - bear with us!Sorry - I'm confused.
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