# CU refused loan to clear mortgage



## PinkLloyd (25 Jun 2022)

Amongst the options I considered when deciding how best to pay off the remainder of our mortgage with UB, I enquired about getting a personal loan from my local credit union. I know I would have no problem getting a loan of this moderate size, I have a good credit record, have borrowed from them numerous times and cleared all of the loans etc.

I made an application for a personal loan. As part of the explanation as to how I would be able to pay it back, I _volunteered _(note!) the information that I was going to use it to clear a mortgage, as the loan repayments would have been much less than the monthly mortgage payments. I thought, win-win situation here, the credit unions are desperate to loan, I could clear the mortgage and actually have more disposable income each month.

The loan was refused and I was told that credit unions are not permitted to loan for that purpose under Central Bank regulations.

Note that I pointed out that I was applying for a _personal _loan. I could have said it was for a holiday, or to buy a horse, or 42 washing machines, in fact, I needn't have said what it was going to be used for at all .... it was a _personal _loan!

Has anyone ever heard of any such Central Bank regulations?


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## ClubMan (25 Jun 2022)

Why don't you ask your CU to refer you to the relevant rules/legislation?

But, whatever about regulations, surely using a CU loan to clear a mortgage doesn't make financial sense given that the former will almost certainly be more, and probably much more, costly (higher nominal, and effective, interest rate) than the latter?

What amount are you talking about?
What interest rates apply to the mortgage and the CU loan?
How much do you have to have in shares/on deposit with the CU to get the loan?


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## Paul O Mahoney (25 Jun 2022)

PinkLloyd said:


> Amongst the options I considered when deciding how best to pay off the remainder of our mortgage with UB, I enquired about getting a personal loan from my local credit union. I know I would have no problem getting a loan of this moderate size, I have a good credit record, have borrowed from them numerous times and cleared all of the loans etc.
> 
> I made an application for a personal loan. As part of the explanation as to how I would be able to pay it back, I _volunteered _(note!) the information that I was going to use it to clear a mortgage, as the loan repayments would have been much less than the monthly mortgage payments. I thought, win-win situation here, the credit unions are desperate to loan, I could clear the mortgage and actually have more disposable income each month.
> 
> ...


I can see why they refused you.

They are right they can't give you a loan for what you asked for.

And they don't give loans for horses either.

The CU movement was set up in the 50s in Ireland to do nothing other than build a fund to allow families to save a bit and borrow a bit when needed,  it also extended that remit to education of family members of the generation subsequent...


Why do you feel/ demand they should give you a loan to pay off your mortgage? Can you not approach another financial institution,  or are you dealing in cash.?

Whatever CU did this, I applaud them in sticking by the principles of it cause , because the money will help multiple of those who need it.


Why would you take out a loan from the CU anyway....apparently the most expensive lender on the market...

" its better to have 1000 €500 loans out that one 500,000 loan.


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## ClubMan (25 Jun 2022)

Paul O Mahoney said:


> or are you dealing in cash.?


What on earth makes you suggest that?   


Paul O Mahoney said:


> Whatever CU did this, I applaud them in sticking by the principles of it cause
> ...
> Why would you take out a loan from the CU anyway....apparently the most expensive lender on the market...


Is that one of its principles? Being the most expensive lender on the market?


Paul O Mahoney said:


> " its better to have 1000 €500 loans out that one 500,000 loan.


Huh?


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## dubdub123 (25 Jun 2022)

I took out a personal loan with credit union few years back and over time it reduced to an amount that I felt i could clear off in a year (rather than keep it for 2 plus years), and avail of a better "one year rate" at the credit union. I discussed it with them but they said they wouldnt lend in order to clear off another loan (even in this case when both loans were through same CU).


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## PinkLloyd (25 Jun 2022)

ClubMan said:


> Why don't you ask your CU to refer you to the relevant rules/legislation?


I did, but everything was in relation to mortgage and property lending. I didn't apply for a mortgage, or borrowing for a deposit on a house (which, let's be honest, pretty much everyone I know did, back in the day!)


ClubMan said:


> surely using a CU loan to clear a mortgage doesn't make financial sense


No it doesn't, but it was one avenue I was exploring. The motive was to get away from UB as quickly as possible before the mortgage gets transferred to PTSB. I left PTSB (post financial crash) because at the time they quoted me a 9% variable rate. One advantage of a CU loan is that you can pay it off as quickly as you like, and I've already exhausted the 10%/year I can pay off with UB's fixed rate.


Paul O Mahoney said:


> The CU movement was set up in the 50s in Ireland to do nothing other than build a fund to allow families to save a bit and borrow a bit when needed


I would have thought that securing the family home fits into that ethos. I have saved a bit and was now asking to borrow a bit.


Paul O Mahoney said:


> Whatever CU did this, I applaud them in sticking by the principles of it


I'm also a big supporter of credit unions, and use them anytime I need to borrow small or medium amounts (in this case, less than the cost of a new car). I was just taken aback that this would be such an issue. But fair point, if it's the principle of the thing then fair enough -- but why say the Central Bank was the problem? I'm in no way being critical of the CU, I'm just curious to know if anyone has ever come across such a Central Bank regulation.


Paul O Mahoney said:


> And they don't give loans for horses either.


While they might not lend to buy a horse, I'm pretty sure there are people who've taken out CU loans to put it _on_ a horse. I also don't see anything there to stop someone taking out a car loan, and buying a horse instead.


dubdub123 said:


> they said they wouldnt lend in order to clear off another loan


This particular CU regularly accomodates "top-ups" to existing loans. One loan type advertised is specifically intended to consolidate and pay off other debt like credit cards. In this case, they probably didn't want to agree to what would have effectively been an interest rate cut, from their perspective.


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## Groucho (25 Jun 2022)

Paul O Mahoney said:


> Whatever CU did this, I applaud them because the money will help multiple of those who need it.



Nowadays, most Credit Unions are unable to find anyone - let alone "those who need it" - who'll take a loan from them!

Hence I'm rather surprised that the loan committee didn't find a creative way to make the funds available to this borrower, especially given their good track record.


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## skrooge (25 Jun 2022)

PinkLloyd said:


> No it doesn't, but it was one avenue I was exploring. The motive was to get away from UB as quickly as possible before the mortgage gets transferred to PTSB. I left PTSB (post financial crash) because at the time they quoted me a 9% variable rate. One advantage of a CU loan is that you can pay it off as quickly as you like, and I've already exhausted the 10%/year I can pay off with UB's fixed rate.



Just to point out you can overpay by more than 10% a year. Yes, it might involve a break free but recent movements in interbank rates makes it unlikely (or at least reduces the likelihood of such fees being large). 

Looking at your other post 






						UB mortgage paid off next 12 months - can I request deeds now?
					

We will have our Ulsterbank mortgage paid off around Q2 next year, about a year ahead of the original mortgage schedule. Final payment will be a lump sum (savings). With UB leaving, I am a bit concerned about potential delays (or general challenges) with getting the deeds from them as and when...



					www.askaboutmoney.com
				




I don't understand why you be actively looking to transfer your mortgage to another provider - especially at higher rates - if you will shortly be in a position to clear the balance. Even if you were after a lower rate the moving costs (legal fees, valuation costs) would likely make this a costly move. 

I appreciate you may not want to transfer to PTSB but no point cutting off your nose to spite your face. If you're going to clear your mortgage soon rest assured PTSB won't make much of anything off your loan.


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## PinkLloyd (25 Jun 2022)

skrooge said:


> Looking at your other post


That's not my post (although I did contribute on the thread, as I am in a similar situation). What I want to do is clear the mortgage, and I will do this shortly. Long story short, in the meantime, rocketing inflation about to eat into other savings makes using those savings to clear this mortgage a no-brainer. My CU enquiry was just part of the process of exploring options.


skrooge said:


> I appreciate you may not want to transfer to PTSB


This is where my principles kick in though .... based on my past experience with them, I never want to darken their door again. I'll happily pay more elsewhere if it means having nothing to do with them.


skrooge said:


> Just to point out you can overpay by more than 10% a year.


I did not know that -- thanks for the tip. I'll be paying a break fee but the latest statement I got puts this at only €19 (!), another surprise.

Back on topic though, I don't think there is any Central Bank regulation that forbids a CU lending to clear a mortgage. I would have thought it would make a lot of sense for a lot of CU members, and would be good for the CU sitting on piles of cash _and_ its members collectively.


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## skrooge (25 Jun 2022)

PinkLloyd said:


> Back on topic though, I don't think there is any Central Bank regulation that forbids a CU lending to clear a mortgage. I would have thought it would make a lot of sense for a lot of CU members, and would be good for the CU sitting on piles of cash _and_ its members collectively.


On this point could there be an issue that the cu could be charged with mis-selling a financial product. I don't know much about the central banks code of conduct but I image there's something in there about ensuring the product is a right fit. Refinancing a relatively low cost mortgage with an higher cost unsecured credit  would be a hard one for them to get past the regulators.

Or maybe it's not in the regulation and they are being a good cu and are looking after the interest of their members, well in this case one member.


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## PinkLloyd (25 Jun 2022)

skrooge said:


> Refinancing a relatively low cost mortgage with an higher cost unsecured credit would be a hard one for them to get past the regulators.


You could be on to something there alright! 


skrooge said:


> Or maybe it's not in the regulation and they are being a good cu and are looking after the interest of their members, well in this case one member.


I do admit in hindsight it was not the brightest idea I've ever had. Financial "tough love" perhaps!


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## Pinoy adventure (25 Jun 2022)

I had a similar experience with my own credit union.we needed 25k towards the cost of buying a property but once they asked the purpose of the loan which we told them,the loan was refused.

I was advised it it was for any other purpose it would of being granted.

Op don’t forget if they refuse you,it will remain on your credit record that your loan was refused.


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## skrooge (25 Jun 2022)

Pinoy adventure said:


> I had a similar experience with my own credit union.we needed 25k towards the cost of buying a property but once they asked the purpose of the loan which we told them,the loan was refused.



Interesting, was the €25k loan going to be the sole borrowings for the cost of the property or was there a mortgage from another institution involved?


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## Pinoy adventure (25 Jun 2022)

skrooge said:


> Interesting, was the €25k loan going to be the sole borrowings for the cost of the property or was there a mortgage from another institution involved?


It was going too be the sole borrowing too purchase the property.
No mortgage involved.


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## PinkLloyd (25 Jun 2022)

Pinoy adventure said:


> we needed 25k towards the cost of buying a property but once they asked the purpose of the loan which we told them,the loan was refused.


In fairness, this _is_ actually covered in the regulations, however there was an amendment in 2020 whereby they're no longer required to hold first charge on the property. Nevertheless, yours was a clear case of borrowing to buy property, and as credit unions can now offer mortgages, it is also good business sense for them to refuse other loans for the purpose of buying property. I only applied for a personal loan however. If I go back next week and say I just want to buy a second-hand car, or pay for a wedding, I know I'd get 25K no problem.


Pinoy adventure said:


> if they refuse you,it will remain on your credit record that your loan was refused.


Isn't this beyond insane?

Credit Union member with pristine credit history in permanent pensionable employment looking to borrow money to pay off the mortgage on the family home which would reduce monthly outgoings by 30% in the face of rampant inflation, rising mortgage interest rates and a probable recession, from a Credit Union that's paying the banks to hold the stockpiles of cash they can't lend? Black card!


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## ClubMan (26 Jun 2022)

PinkLloyd said:


> I'm also a big supporter of credit unions, and use them anytime I need to borrow small or medium amounts (in this case, less than the cost of a new car).


You are very likely paying for the privilege of supporting the CU compared to borrowing from other sources. Maybe you're ok with that, but many would not be.


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## ClubMan (26 Jun 2022)

PinkLloyd said:


> Credit Union member with pristine credit history in permanent pensionable employment looking to borrow money to pay off the mortgage on the family home *which would reduce monthly outgoings by 30% *


Almost certainly that is incorrect and the CU loan used to clear the mortgage would be a much higher cost loan (both the nominal loan rate charged and the effective higher rate once money required to be held on deposit or in shares while borrowing is factored in) than the original mortgage loan secured on the property.


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## 24601 (26 Jun 2022)

Pinoy adventure said:


> Op don’t forget if they refuse you,it will remain on your credit record that your loan was refused.



This isn't true. Don't know where you got that from.


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## NoRegretsCoyote (27 Jun 2022)

PinkLloyd said:


> No it doesn't, but it was one avenue I was exploring. The motive was to get away from UB as quickly as possible before the mortgage gets transferred to PTSB. I left PTSB (post financial crash) because at the time they quoted me a 9% variable rate. One advantage of a CU loan is that you can pay it off as quickly as you like, and I've already exhausted the 10%/year I can pay off with UB's fixed rate.


So you want to borrow at a much higher rate to have the flexibility to pay off a loan earlier?

I can't see the logic in this at all.


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## Savvy (19 Jul 2022)

24601 said:


> This isn't true. Don't know where you got that from.


The fact that a credit check was done will remain on file for five years but nothing to do with what the institution decided on the basis of that check.
Example below is from my CCR request showing a PTSB approach last year.




5 years seems a long time to retain this though, for some reason I thought it was only one year.


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## 24601 (19 Jul 2022)

Savvy said:


> The fact that a credit check was done will remain on file for five years but nothing to do with what the institution decided on the basis of that check.
> Example below is from my CCR request showing a PTSB approach last year.
> View attachment 6396
> 5 years seems a long time to retain this though, for some reason I thought it was only one year.



Not sure why the 5 years is the retention period either to be honest but I don't think it makes much difference. Plenty of people apply for loans and don't take them or apply to multiple providers at the same time if rate shopping, so this footprint shouldn't matter to any lender. 

I don't think the ICB even contained data about refusals so not sure where that idea originated.


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## noproblem (19 Jul 2022)

Plenty of people getting loans from Credit Unions for a variety of different things. I'm pretty certain that Credit Unions in certain counties and towns have their own policy on who gets a loan and for what it's loaned for.


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## AnTuirse (9 Sep 2022)

"The loan was refused and I was told that credit unions are not permitted to loan for that purpose under Central Bank regulations."

They seem to make their "rules" up as they go along / suit themselves.....

Why is Savvi credit union able to offer mortgages then at 2.95% ???






						Mortgages - Savvi Credit Union
					






					savvi.ie


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## Monbretia (9 Sep 2022)

AnTuirse said:


> "The loan was refused and I was told that credit unions are not permitted to loan for that purpose under Central Bank regulations."
> 
> They seem to make their "rules" up as they go along / suit themselves.....
> 
> ...


OP was not applying for a mortgage though, they had applied for a personal loan to refinance a mortgage.  Assume they were not offering the deeds as security for a new mortgage with CU


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## PinkLloyd (9 Sep 2022)

Monbretia said:


> OP was not applying for a mortgage though, they had applied for a personal loan


Precisely.


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