Loan less than savings - records given to ICB?

joreilly77

Registered User
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I asked this question at my CU and they weren't sure so maybe someone has come across this before.

I have no credit record in Ireland (lived overseas for a long time) and my mortgage advisor suggest I get a CU loan and repay it to establish some sort of credit record with the ICB (my CU is listed as one that interacts with the ICB). I'm about to buy a new car and instead of using my CU savings I'm going for a loan. As the amount I'm borrowing is less than my savings I get a preferential rate and an instant 'yes' to the loan with the savings used as collateral.

As this loan is a little different to an ordinary CU loan does anyone know if the payment history etc. is reported to the ICB? I got a blank face when I asked at the CU.
 
It should be if the CU is one that subscribes to the ICB, I know of no differential between secured and unsecured loans in this case but the CU should be able to answer the question, email the manager and ask.

As for borrowing just to establish a record I would have thought if everything else was strong in your application such as deposit, income, clean current account etc having no credit record here because you were abroad would be a small part of the equation, have you tried more than one bank?
 
Hi J

This sounds all wrong to me. Forget the ICB record for the moment.

In general, it makes no sense to borrow money while you have money on deposit. It's likely that any mortgage lender will take the outgoings on the mortgage into account when considering how much to lend to you.

If you will be borrowing to buy a house, you will be borrowing at around 4% - depending on loan to value. The Credit Union rate is much higher when you take into account that you will have money on deposit.

It's best if you give us all the relevant figures

1) How much is the car
2) How much savings have you
3) How much is the house you want to buy?
4) How much mortgage do you want?
5) What is your salary?

In an ideal world, you should buy the car for cash and have all your borrowings on your mortgage.

Brendan
 
Hi folks - thanks so much for your input. I'm looking to buy a property hopefully in the next 18 months or so, so it's not an immediate situation. I've recently moved to a new job and area and want to bed in for at least 12 months before making any concrete property moves. Currently properties in the new area are around the 150k mark give or take. My salary is 40k gross.

I currently have 52k on deposit and save at least 1k per month by standing order and have done for a number of years. The car is 21k and whilst that sounds a lot I will get an annual car allowance from my job which will offset the cost over time.

As I've lived with my parents since returning to Ireland I have nothing in my name, no utilities, loans, credit cards etc. I spoke with an independent IFA who suggested the CU loan to bolster my non-existent credit record. The CU loan rate is 5% for amounts less than savings.
 
The purpose of a Credit Union is in its name - credit as in borrowing. I would not buy the car out of savings if it were me.

Liquidating one's savings removes the need to make regular payments and loss of financial discipline. With the greatest respect to BB the reason to be in a credit union is to borrow and allow others to borrow.

The savings record is very impressive - I would retain that.

Unfortunately the Credit Unions interpret some of the circulars from the Central Bank without understanding the law. The credit directive suggest that "(1) Before concluding a credit agreement with a consumer, a creditor shall assess the consumer’s creditworthiness on the basis of sufficient information,where appropriate obtained from the consumer and, where necessary,on the basis of a consultation of the relevant database."

[Question for interested student - Q1 Does the CU have to get ANY documents from a member? Q2 Must a credit search be conducted? Note: assume the borrower has savings in excess of the borrowings being suggested? ]

There is no obligation in your case to do a credit bureau search, but the credit union does it in practice.

You will have an ICB record after the loan and your payment history will be available even if you borrowed €201 (the directive applies above €200).

Most borrowing for a car is being picked up by the Credit Union competitors as apparently Credit Unions also insist on up to date mortgage statements - despite the ICB.
 
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