Query re maximum permitted withdrawal vs outstanding loan

[Gekko]

Hi Folks

Quick question - If someone took out a CU loan of €9,900 last year based on the fact that they'd €3,300 on deposit with the CU, what's the maximum cash withdrawal they can make if they now owe €7,250 and have €4,800 on deposit?

For example, do they just have to maintain the original 3:1 loan to savings ratio and are they therefore permitted to withdraw approximately €2,400 (i.e. €4,800 minus €7,250/3)?

Thanks.

 

[ClubMan]

CU legislation prevents withdrawals that would leave the share balance below 25% of any outstanding loan. In this case it looks like the maximum withdrawal (possibly subject to approval by the CU manager or board) would be €4,800 - (€7,250 x 25%) = €4,800 - €1,813 = €2,987. While the legislation is clear some of the policies and practices of specific CUs are not always so. In this case it would make sense to consider offsetting the €4,800 against the outstanding loan balance of €7,250 leaving €2,450 outstanding and thus lower repayments or a much shorter term if you stick to the original repayment amount. CU legislation allows for this but some people (including a friend of mine) have been told by their CUs that this is not allowed.

See this thread for more on these issues:

http://www.askaboutmoney.com/showthread.php?t=155464

 

[Gekko]

Thanks, Clubman.