Use mortgage break to pay other loans?

Doodlemoll

Registered User
Messages
26
Ages:57 & 62
Gross income: 45,555 public sector
Gross income spouse: 24,500 private sector (now on covid ws)
Other income: rental from HAP tenant 380 per month on other property
Mortgage: AIB 2.75% interest rate, balance 30,519 expiry 3/1/23
Credit union loans: motor loan balance 6,860 student education loan balance 10,800, home improvement loan 4,500. Personal loan 4,700.
Credit card: 0.00 and shredded
Savings: none apart from credit union shares 3,000.
Children just finished college, with retirement on horizon in 2 to 5 years would like to be debt free. Used 1st month of 3 month mortgage break to clear credit card and will divert next 2 months to make inroads on credit union debt. Should we look for a further 3 month mortgage break to divert to cu loans or are we robing peter to pay paul?
 

Baby boomer

Registered User
Messages
245
I'd say Yes! You're replacing debt that's costing you 10%+ with debt that's costing you 2.75%. (Others here will disagree!)

A few caveats. This is only a good idea as long as you don't run up further short term debt after the payment break. And ideally, once you do pay off one credit union loan, divert that money into increased payments on the other loans.
 

Doodlemoll

Registered User
Messages
26
Thanks babyboomer for your advice..terms left on credit union loans are from 30 to 54 months. Will focus on clearing them earlier as possible.
 

Brendan Burgess

Founder
Messages
41,028
Credit union loans: motor loan balance 6,860

Savings: none apart from credit union shares 3,000.
This could be your most expensive debt.

You have net borrowing of €3,860

You are probably paying 9% on €6,860 or €617 interest
You are probably getting 0% on your shares.

€617 / €3860 = 16% interest

So that should be your first priority.

Brendan
 

Brendan Burgess

Founder
Messages
41,028
Given that you are unlikely to be borrowing again, I would say yes, apply for an extension on your mortgage and clear your very expensive credit union loan.

However, you must have the discipline not to run it up again.

If you were younger and might be trading up in the next few years, I would advise against getting a mortgage break unless you would go into arrears without it.

Brendan
 

Doodlemoll

Registered User
Messages
26
Monthly am.paying 1062 on mortgage loan and a direct debit of 685 per month goes to credit union. Credit union loans apr are 8.5%, 6.59%, 10.4%.. dont plan on future loans. College fees completed..
 

Brendan Burgess

Founder
Messages
41,028
Hi Moll

It is just the interest rates you should be looking at and not the repayments.

By the way, go into the Credit Union and demand that they set the €3,000 against the loan amount.

That would save you about €300 in interest a year.

They will refuse initially, but kick up a fuss.

Brendan
 

Tenkrat

New Member
Messages
3
Only if you’re granted a payment moratorium by your lender. Or if there’s some kind of legislation that grants such a delay. Before not paying your payment it’s best to try to contact your lender and request a payment forbearance of some kind. Otherwise, there could be late fees, or foreclose fees.
 

Doodlemoll

Registered User
Messages
26
went into credit union and unsurprisingly credit union said no to my request to use the shares to clear off the smaller of the 3 loans. they are saying shares are tied up as colatteral and most they could release from the shares to pay off a loan is 50% at a push.
Using this 50% credit union shares and the bank's 3 month mortgage break will clear one of the credit union loans which is also the one with the highest interest rate of 10.5%
This will leave me with a restructured credit union of 2 loans 10800 at 8.5% and 6500 at 6.6% with repayments over 3 years.
Are these still very expensive loans and would it be better to consolidate the 2 credit union loans and get a new personal loan from the bank and finish with the credit union alltogether.
 
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