# Credit Union Loan - Options?



## RichieRich (23 Aug 2010)

Hi all, 

Hopefully this is the right thread to post this.  I have a credit union loan originally for 20k, now 16k remaining.  I have 5k in shares and the "Interest rate per annum" as outlined on the credit agreement is 10.4% (and APR of 10.95%). 

I requested to have some of my shares used to reduce the loan balance (and thereby reduce the interest) but was told this is not possible. 

Any suggestions for how I might proceed?  Could I get an 11k loan elsewhere at a more attractive rate and use that to clear the credit union loan (in addition to my shares obviously)??  

It just annoys me each time I make a payment against the loan, how much of the payment actually goes on interest!  I suppose caveat emptor applies!

Thanks for any/all suggestions.


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## fizzelina (24 Aug 2010)

Richierich, banks don't lend money generally so as to pay off a debt with another institution. So this is most likely even be an option. Plus credit unions are usually more flexible with regard to making extra payments etc. You can use your shares to clear off the last 5k of the loan. I think your best bet is to keep paying as much as you can off the CU loan to clear it as soon as you can, that will keep the overall interest down if you try repay it sooner.


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## RichieRich (24 Aug 2010)

Thanks Fizzelina, sound advice!


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## ncr (24 Aug 2010)

Check the rules of your credit union.  I recently transferred a substantial chunk of my "shares" against a loan leaving my shares at 1/4 of the loan value.  I was told I would need to write to the credit committee for their approval to do this transfer.  The credit committee of my credit union meet monthly, I was given the date of the meeting and the following day received a phone call stating that the transfer had been approved.  Transfer then took place.  I too wanted to reduce the interest payments.


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## RichieRich (24 Aug 2010)

Thanks ncr, I did check, but was told that every credit union is different and the policy of mine is not to allow transfers like this.  The guy made the point that if every member with a loan transferred some of their shares, then this would affect the overall amount that the credit union could lend.  
I'd still be tempted to get an 11,000 euro loan elsewhere (if I got a better rate) and clear the lot but I don't think the bank rates are much better.


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## littlelad (25 Aug 2010)

I believe there's  a High Court case pending regarding this very issue due to be heard in Oct'10. Credit Unions not allowing members to offset their shares against their loans is against the ethos of the movement. Furthermore the idea that if everybody did it they'd have no money to lend is nonsence. These shares are pledged as security against that loan and should be used if required by the member to reduce their indebtedness. Transferring the shares reduces the risk to the credit union but the boards are generally not qualified to understand such concepts. Just to note the rules of the CU. Rule 38 (3) refers to the withdrawal of shares and states the board cannot allow a withdrawal of shares that would mean the total value of remaining shares would be below 25%. This rule refers to a physical withrawal of funds. However rule 38 (4) states that a member can request a share transfer to reduce their indebtedness and the board of the CU may allow this. The only reason a board can give not to allow a transfer under this rule is to maximise their interest income. Hardly in line with the ethos of the CU movement ' not for profit etc'. It might be worth putting this in writing to your CU and quote rule 38 (4). Worth a shot.


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## redbhoy (25 Aug 2010)

I sent a letter to my credit unions credit committee detailing the change in circumstances Ive had. I needed to withdraw shares and minimise loan repayments to as low as they could go and I asked to use shares if they needed to.
Got call today. Withdrawl approved, They also approved transferring some shares off my loan and reduced payments to less than half of what I was paying.
(Although this basically included a new loan over 5 years.)


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## RichieRich (25 Aug 2010)

Thanks for the further advice guys.  It seems I should put pen to paper!  Before I do, it's worth mentioning that the guy on the phone (teller) also told me that every credit union is different (even when I mentioned that I believed some transfer was permitted under the Credit Union Act).  

My credit agreement (signed by me!) also states that I "hereby pledge all paid shares..bla bla bla, as security for replayment of this loan".  
Does that mean I'm bunched, or should I put a request in writing as suggested above, quoting the sections of the act?  

The other idea I had was to transfer the loan to another credit union with a better rate/terms (one near where I live, rather than the current one, near where I work).  Would it be possible to do that I wonder?

Finally I wouldn't like to "sour" the good relationship I have with my credit union.  Should I even be worried about this aspect of it or should I be more worried about saving on the interest paid and laying down the law to them?!

Thanks again for any and all advice!


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## fizzelina (26 Aug 2010)

RichieRich said:


> Thanks for the further advice guys. It seems I should put pen to paper! Before I do, it's worth mentioning that the guy on the phone (teller) also told me that every credit union is different (even when I mentioned that I believed some transfer was permitted under the Credit Union Act).
> 
> My credit agreement (signed by me!) also states that I "hereby pledge all paid shares..bla bla bla, as security for replayment of this loan".
> Does that mean I'm bunched, or should I put a request in writing as suggested above, quoting the sections of the act?
> ...


 
How do you expect to "lay down the law" when you have already signed an agreement saying the shares can be held as security?? You can't transfer the loan because the current CU will have the shares and a new CU won't lend with no collateral?? You have the wrong attitude, waging a battle with the CU although you have an agreement in place. I would think it's beneficial to you to have a good relationship with your CU since they have been facilitative so far with you.


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## millieforbes (26 Aug 2010)

littlelad said:


> These shares are pledged as security against that loan and should be used if required by the member to reduce their indebtedness. Transferring the shares reduces the risk to the credit union but the boards are generally not qualified to understand such concepts.


 

Have to disagree with you on this - if the shares act as security on the loan then using them to reduce the balance will at best leave the risk unchanged, but is more likely to increase the risk as the residual balance is now unsecured rather than secured lending. The net balance will still be the same at 11k, but in risk measurement terms, the likelihood of the borrower defaulting will increase as the psychological barrier of losing the security has been removed


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## TLC (26 Aug 2010)

redbhoy said:


> I sent a letter to my credit unions credit committee detailing the change in circumstances Ive had. I needed to withdraw shares and minimise loan repayments to as low as they could go and I asked to use shares if they needed to.
> Got call today. Withdrawl approved, They also approved transferring some shares off my loan and reduced payments to less than half of what I was paying.
> (Although this basically included a new loan over 5 years.)



That Credit Union sounds like they are trying their best to help out members in these changed times - it's easy to be critical of CU's but I would still consider them better to deal with than most banks or other financial organisations.


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## Slim (26 Aug 2010)

RichieRich said:


> Thanks for the further advice guys. It seems I should put pen to paper! Before I do, it's worth mentioning that the guy on the phone (teller) also told me that every credit union is different (even when I mentioned that I believed some transfer was permitted under the Credit Union Act).....
> 
> The other idea I had was to transfer the loan to another credit union with a better rate/terms (one near where I live, rather than the current one, near where I work). Would it be possible to do that I wonder?
> 
> ...


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## Nationaldude (26 Aug 2010)

I enquired a few years ago about transferring my CU a/c to a branch nearer to where I live now and as far as I remember it's at the discretion of both CU branches involved whether to allow the transfer to take place. In effect, the branch you wish to transfer to has to agree to "buy" the loan from your existing branch, who in return will transfer any shares to the new account.


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## seriams (26 Aug 2010)

Hi Ritchierich,

I was able to do this in my local credit union last month.I had 4k in savings, was allowed to use that against my 6k loan, albeit I have a new loan with them now. They told me over the phone that it wasn't their policy however when we met them and they saw our credit rating they were happy to do so.


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## RichieRich (26 Aug 2010)

Thanks for the further responses and advice.  Letter drafted and ready to go, politely reminding them of Rule 38(4).  What can they say only No!?  I'll keep you posted!


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