# Use savings or take out a loan?



## Susanmcna (22 Jun 2018)

-Our 18 year old hopes to go to college in September.  She will live in student accommodation as too far to commute.
-We are not eligible for susi  grant(miss it by a few euro).
-We save €400/ month into credit union.
-We have €15000 total saved in credit union.
-Husband is signed off sick with depression (10 months) but we have income protection amounting to 70 percent of his wage. We have still managed to save.
-We have cars  x 2 that are 13 years old but are running fine.
-We have 6 years left on mortgage. We pay €700 permonth.
-Our other two children hope to go to college in 2020 and 2024.
-By the time 3rd child goes to college our mortgage will be payed and we can direct that money to his college fund.

My question is whether we should use savings to send oldest to college or take out a loan and repay loan with the €400 we save. In that way , we have €10k left in credit union in case a car needs to be replaced.

I would really appreciate any insights or advice please.


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## Brendan Burgess (22 Jun 2018)

You should use your savings to pay for the college expenses. 

If you need to buy a car, there is a good chance that your Credit Union will give you the loan anyway. 

What interest rate are you paying on your mortgage?  

It might be worth knocking €10k off it. You will be spending this money anyway within the next 6 years,so why not pay it off now to reduce the interest. 

Though I do appreciate the comfort of having the money there for emergencies. 

Brendan


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## Susanmcna (22 Jun 2018)

Thanks brendan.

1.75 %tracker on mortgage.
I forgot to say we have no other debts and pay off credit card Monthly. And have a good pension with full Avc paid.


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## David1234 (22 Jun 2018)

Sorry to hear about your husband. How long are you entitled to the 70% of his wage for?

How much per annum will the college course and accommodation cost?

I would continue to save as you are and pay the college and accommodation fees out of your savings. If the car needs to be replaced down the road you should easily get a loan if required given your savings history.


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## Brendan Burgess (22 Jun 2018)

Susanmcna said:


> 1.75 %tracker on mortgage.



OK, then it's better to hold onto it. 

Knocking €10k off it would save you only €175 a year.  Access to the cash is more important. 

Brendan


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## Susanmcna (22 Jun 2018)

Thanks Brendan and David.

He has payed around 20 grand into the income protection. He can stay at 75 percent pay until he is 65. He is 50 now. He had to see various consultants and attend cbt to attain it and presume they will be ongoing. We may have been eligible for a full susi grant if we didn’t have insurance and went on welfare with fis but that’s a different story.

One more clarification please. If we run down our savings for education, will the credit union still give us a loan for a car? I thought if you wanted to borrow 10 grand for a car you needed to have 10 grand in the bank? Or have they changed that? 

I presume it will cost 10 grand to send daughter to college each year? That’s the sum I’ve heard but am only now facing the reality Cos we have had a lot on the last few months.


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## Fiddlybits (22 Jun 2018)

Hi Susanmcna- My understanding of the Credit Union is that loans are based on your ability to pay back rather than what savings you have. On that assumption you should be able to use some  savings maybe around €13000 to help fund this years college fees. Continue to save as this will enhance your chances of a future Credit Union loan.


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## Susanmcna (22 Jun 2018)

Ok thanks for that Fiddlybits.
I was going to ask for a meeting with a credit union manager for clarification. But I was afraid they may press us to take out a loan. So I decided to post here for some independent advice. I’m glad I did


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## Fiddlybits (22 Jun 2018)

By all means have a meeting with the CU manager as they all operate independently but be aware that you have options..


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## Bronte (24 Jun 2018)

Do you need two cars. Will the child work during the holidays to ease the financial burden on you. I would not borrow. I think the credit union will allow you borrow 3 times your savings. You are going to need a car sooner rather than later. As far as I know many people now purchase cars via car loans by the dealer or a PCP. There is a thread on here about that.

Is a credit union the cheapest finance?

Can you break down the 10k.

Are you entirely sure the insurance will pay out for your husband for another 14 years.


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## Susanmcna (24 Jun 2018)

Thanks bronte.

My husband plans on returning to work ASAP. Hopefully before xmas on a phased basis. But yes insurance does last for 14 years. 

Susi grants are based on last years pay. Daughter may get something next year as he only received 70 percent paycheck.

Daughter is working all summer. 

We need two cars when my husband returns to work as we live rurally.  We have had no loans on them for the last 8 years. We have a great mechanic and they cost us around 1.5 grand  total yearly to maintain including tyres. 

I am going to ask for a meeting with credit union management.  If I loan is needed we may check the Ptsb where we have our mortgage. 

And I haven’t broken the 10 grand down (I’m afraid too)-that is the figure bandied about when you have a third level student who lives away from home and doesn’t get a grant.


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## Steven Barrett (25 Jun 2018)

I agree with the others, use savings for the immediate expense now and you can always borrow in the future for a car. While the credit union give student loans, will they class a loan you take out to pay for your child a student loan? If not, you will be taking out a personal loan which has a higher interest rate than a car loan. And it has to be repaid over 5 years whereas a car loan can be repaid over 7 years. 

It is also great to see that your husband took out income protection cover. It's not cheap and people are usually put off by the price and the thoughts that "it will never happen me". Knowing that he will receive 70% of his income while off sick must take a lot of the pressure off and let you all concentrate on him getting better. 


Steven
www.bluewaterfp.ie


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## cremeegg (25 Jun 2018)

Susanmcna said:


> -We are not eligible for susi  grant(miss it by a few euro).



Can you not make a pension contribution before October to reduce the 2017 income for Susi purposes.


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## Susanmcna (26 Jun 2018)

Thanks steven. Cremeegg-w e will look into that.

We met with credit union manager yesterday. So we have proven that we can save (€400/month). But we have not proven that we can pay back loans (as we have not taken one out before). So he suggests we take immediately out a loan of 10,000 for 5 years , APR6.43%.  The total amount repayable  is 11,670. We pay back in monthly instalments of €194. We should continue saving the other €200. Then if we ever need an emergency loan for car etc... They will just rejiggle the figures that we  can borrow because we have proven we pay back on time.

I can see their point but I don't like it.


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## Steven Barrett (26 Jun 2018)

Sounds like sharp practice to me. If he says that you haven't proven you can pay back a loan, why is he giving you €10k? It's being done as a trial run? And what are you supposed to do with the €10k they're after giving you? Use it to make the repayments? Along with the additional €1,670 you will have to pay them for the pleasure. 

If they are willing to give you €10,000 today, they will give you €10,000 in a few years time too. 


Steven
www.bluewaterfp.ie


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## David1234 (26 Jun 2018)

I would not take the loan out now as the funds are not needed. The 10k will be costing you over €50 a month in the first year to sit in an account. Hold off on borrowing anything until you know how much the likely expenses are going to be in September. Hopefully at that stage your husband will be back in work full time and there is an increase in the take home pay.


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## New2This (26 Jun 2018)

If you want to build a track record of repaying (and I would not agree that you need to do so, my CU took my regular savings as proof of my repayment ability), why not take a loan for far less like 1k. Put that directly into your CU savings and agree to payback over a year but pay back over 3 months.


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## Steven Barrett (26 Jun 2018)

To be honest, I have never heard of this practice before. We don't do credit scores where you show your past record of repaying debts. We do credit ratings where lenders check whether you have a bad history of repaying loans.


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## Susanmcna (26 Jun 2018)

We have another credit union account in the same branch where we save €250/ month for Xmas and holidays. It is emptied by January and then starts to increase again. I am only writing this to show we are good at budgeting.

When we arrived, we shook hands and I explained why we were there-just to explore our options going forward. He then addressed my husband for the remainder and barely looked at me. If we were buying a car, I would have gone elsewhere! We never mention my husband was off sick so that is not a factor.

Thanks for the replies. I need to ponder it more. I'm still unsure. He was really feeding into our financial insecurities.i.e. Quick take  the loan now (and pay for the privilege)  because there is no guarantee we will give you one further down the road.


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## RedOnion (26 Jun 2018)

Susanmcna said:


> So he suggests we take immediately out a loan of 10,000 for 5 years


I'm not easily shocked, but that practice is astonishing.

You don't need a loan right now.

You also don't need the full 10k for college in 1 payment either, so you won't completely deplete your savings.

You need to have a realistic handle of the costs of college. Numbers bandied about are no good to you - you need a proper budget so you can time cashflow.

Include your daughter in that process. Understanding how to manage money is the most important aspect of her education.

Your daughter will be able to get a small interest free loan to take pressure off you.

Who's your mortgage with? A lot of the banks will give a short payment holiday if you've no arrears. It'll be cheaper borrowing.

Generally speaking, credit unions are more expensive than banks for personal loans, as they require savings to be kept.


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## Steven Barrett (26 Jun 2018)

RedOnion said:


> You need to have a realistic handle of the costs of college. Numbers bandied about are no good to you - you need a proper budget so you can time cashflow.
> 
> Include your daughter in that process. Understanding how to manage money is the most important aspect of her education.



Very good advice. You need to have an idea of rental costs. This is can be a how long is piece of string. Sharing a bedroom with 2/3 others all the way up to having her own place. How much are you willing to pay for rent and what will that get you...how close to the college, own room or sharing etc. And as it's your daughter who will be living there, it is up to her to find the place within the budget you give her.


Steven
www.bluewaterfp.ie


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## MangoJoe (9 Jul 2018)

Susan I've nothing to add to all of the sound advice you've already gotten on here.

I would like to say that you're very impressive in terms of your attitude and outlook and I wouldn't be in the least bit concerned for you.

As you were well aware yourself the Credit union Mgr was an odious little creature, unsuccessfully trying to condescend to you while railroading you into buying services on ridiculous pretexts just to make his figures look a little better.

I hope your husband makes a full recovery in the near term and wishing you and your family all the best for the future.


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