The interest rates credit unions offer on loans don't seem to have dropped much over the last number of years despite ECB rates being at record lows and downward movement on bank mortgages rates etc. If they have tons of deposits and are struggling to lend enough, why have they not dropped their rates to be more competitive?
I'd argue demand for CU loans is low partly because they aren't competitive. Looking at a couple of them near me for example, their rates have barely changed in 5 years and they don't give borrowers much reason to go to them over the banks. They charge 8.5% - 11% for car loans, people can do a lot better than that on PCP deals or borrowing on HP via car dealers/banks. Personal loans are 11-12.7% in the local CUs, bank rates are about half that. They offer a mortgage at 4.9%, why do they even bother, who is going to take that!The demand for personal loans doesn’t exist anywhere near the degree needed to shift enough of their deposits on. They could reduce their interest rates to 3 or 4% and I’d say demand would remain static
Over and over I have been saying this.................
Where are the CU loans at 3.9%, to compete against PCP???????
Where are the CU mortgages at 2.5%?
Why not make 2.5% on mortgages against -0.65% on deposit?
Where are the CU loans at 3.9%, to compete against PCP???????
I'd argue demand for CU loans is low partly because they aren't competitive. Looking at a couple of them near me for example, their rates have barely changed in 5 years and they don't give borrowers much reason to go to them over the banks. They charge 8.5% - 11% for car loans, people can do a lot better than that on PCP deals or borrowing on HP via car dealers/banks. Personal loans are 11-12.7% in the local CUs, bank rates are about half that. They offer a mortgage at 4.9%, why do they even bother, who is going to take that!
Your local example is anecdotal.
Over and over I have been saying this.................
Where are the CU loans at 3.9%, to compete against PCP???????
Where are the CU mortgages at 2.5%?
Why not make 2.5% on mortgages against -0.65% on deposit?
Your overall point about the CUs being uncompetitive is absolutely valid.
It's not just the rates - it's the insistence by most of them that you keep money in shares on which they pay 0% while charging you 6% or 12% on the money they lend you.
Brendan
You might argue that but it's not true. CU rates have fallen significantly in recent years without a corresponding increase in market share. Your local example is anecdotal.
This is what they are competing with though, so they are surrendering a huge chunk of the car loan market. Even aside from PCP, their standard car loans are more expensive than their equivalent with the main banks. What's to stop CUs offering HP where the car is the security?Also, comparing PCP and car loans is totally pointless. They're not the same product and have completely different credit risk profiles. If credit unions were offering PCP products then you could argue that they should be priced accordingly but they would be in serious bother if they started offering unsecured personal loans at 0% - 3% for car purchase.
I priced an 8k personal loan over 5 years.Where are you getting your figures for CU personal loan rates?
I'm sure this is true but as a potential borrower why do I care, I just want cheapest rates possible and if I was looking for a loan right now the CUs wouldn't factor in the equation at all.In any event the bank's headline rates versus their actual blended rates across the personal loan portions of their loan books are vastly different.
This is what they are competing with though, so they are surrendering a huge chunk of the car loan market. Even aside from PCP, their standard car loans are more expensive than their equivalent with the main banks. What's to stop CUs offering HP where the car is the security?
I'm sure this is true but as a potential borrower why do I care, I just want cheapest rates possible and if I was looking for a loan right now the CUs wouldn't factor in the equation at all.
I checked with Bonkers.ie to borrow €20,000 over 5 years
An Post Money 5.9%
Avant Card: 6.1%
KBC 6.3%
Most of these have "restricted eligibility" .
Brendan
One important point to note is that most borrowers don't really care that much about interest rates.
They think about the car and not the rates.
They want to get the loan easily and quickly to buy the car. If AIB turns it around in 24 hours, and the Credit Union must wait until the next meeting of the credit committee, AIB will get most of the loans.
On the other hand, if it's not urgent, most members like borrowing from their credit unions because they are seen as cheap even if they are not.
So I doubt that credit unions would get much more business if they reduced their rates.
Brendan
Brendan,a good friend of mine applied for a loan of €2000 with his local south Dublin credit union on Friday 4 th if December.loan approved on Thursday 10th of December with the money lodged into his account.
He went too them Friday 11th and was told he can get the money on Monday 14th of December.as of today he is yet to receive a penny as they don't have €2000 in cash.
They can give him a cheque or bank transfers which is of no valve too him as his credit union is his only account he has.
The embarrassing part is the loan is too pay a trades man too put down a new floor in his home.
Im sure the trades man is regretting doing this work as he cannot be paid for now.
The first repayment is was due yesterday on this loan.
they don't have €2000 in cash.
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