# Unemployed 20 yo with €4k outstanding CU loan. wkly pmts €28 int & €2 capital, option



## porridge

Hi, 

I am posting on behalf of my Brother in-law. He is 20 years old. When he was 16, the local Credit Union gave him a loan for €8,000, on top of a loan he already had for €2,000. Making his borrowings with this Credit union €10,000 in total. At the time he had a job and was able to make the repayments. 

Last year he was made redundant and went into arrears on the loan. There was €4,000 outstanding. He renegotiated with the credit union, and the payments have been reduced to €30 per week, which he is paying out of his social welfare. Of this €28 is interest and €2 is capital payments. 

With such small capital repayments, it is difficult to see how he will ever pay this loan off. 

Is there anything he can do to reduce the interest payment and have some hope of paying this debt?


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## ajapale

Title expanded.

Has he spoken to MABS?


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## SarahMc

I thought under 18s couldn't enter into legal contracts?


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## mercman

He might be best to search around his relatives seeking loans to clear the debt. He will have to enter into a repayment plan with each and every one to get the loans cleared. 

This could prove to be a good lesson for him in later years and not to be gungho with his money.


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## jpd

I find it difficult to reconcile the figures - €28 a week in interest equals € 1,456 per year for a loan balance of € 4,000 which is an interest rate of 36%

These figures can't be correct for a CU loan, can they?


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## mercman

jpd said:


> These figures can't be correct for a CU loan, can they?



Maybe he has got involved with moneylenders. Worked the figures already and this is how it appears. That is why I suggested a whiparound to ease the pressure.


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## netz

The weekly interest on €4000 loan with CU should be no more than about €7.60 per week - that is assuming a rate of 10.5% APR. That might be monthly interest?


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## netz

SarahMc said:


> I thought under 18s couldn't enter into legal contracts?



Correct, U 18's cannot legally enter into a binding contract, so the actual 1st loan of €8000 is null and void under Irish law, so in theory he doesnt have a legal obligation to pay. The official view is called capacity to contract, whereby persons under the age of 18 are considered infants in the eyes of the law, exceptions are the supply of necessaries (goods suited to their actual needs such as food, clothes etc., not huge loans!) so under contract law this loan should never have been given, huge mistake by credit union but the law makes his loan agreement void!!!


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## SarahMc

mercman said:


> He might be best to search around his relatives seeking loans to clear the debt. He will have to enter into a repayment plan with each and every one to get the loans cleared.
> 
> This could prove to be a good lesson for him in later years and not to be gungho with his money.



I'm normally to be found on here preaching personal responsibility and culpibility bla bla, but it is totally scandalous (and illegal) that a child was loaned this amount of money.  I would be shocked if it was a Credit Union, it surely must be more shady, like as you suggest a moneylender.


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## Padraigb

netz said:


> Correct, U 18's cannot legally enter into a binding contract, so the actual 1st loan of €8000 is null and void under Irish law, so in theory he doesnt have a legal obligation to pay. The official view is called capacity to contract, whereby persons under the age of 18 are considered infants in the eyes of the law, exceptions are the supply of necessaries (goods suited to their actual needs such as food, clothes etc., not huge loans!) so under contract law this loan should never have been given, huge mistake by credit union but the law makes his loan agreement void!!!



You don't know the purpose of the loan, so you can't make an informed judgement about whether it was to finance necessaries. Case law does not restrict the definition to modest amounts for food and clothing.


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## corkmike

There is a good chance in this case the credit union asked his parents to act as guarantors, thus if he is under 18 they are personally liable for the loan. I would also suggest talking to other family members and MABS. Also €28 capital is the max interest rate a credit union can charge is 12% and that is also laid out in statute. 
I wish him all the best.
Regards,
Michael


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## Phoenix2011

Big mistake by the CU. Even if his parents acted as guarantor, it's void. If however they gave an indemnity rather than a guarantee it is enforceable even if the original loan was void due to capacity. (im a solicitor and used to work for one of the banks) You should get a copy of the loan documentation and check it out. Feel free to pm me should you need further advice. I doubt the CU will get involved trying to prove the contract was for a necessity for a debt of 4k.


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## Bronte

It's truly shocking that people would advise someone to not pay back a loan they have taken out and which they can afford to repay. In any case there must have been a guarantor.

OP, you can either post on the correct figures because the interest amount seems very large. If he's only paying 2 Euro capital his option is to increase this to bring down the interest. Maybe he could live at home and then use more of his dole to do this. 

The other option is that someone else pays back the loan and he pays them back. 

Just curious what did the 16 year old borrow the two amounts for?  Does he have any assets he could sell?


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## orka

Bronte said:


> It's truly shocking that people would advise someone to not pay back a loan they have taken out and which they can afford to repay.


I would normally sing from the same hymnsheet on this topic but, come on - a 16 year old taking out a SECOND loan!  What age were they when they took out the first loan??  I have kids a bit older and a bit younger than 16 and the thought of either of them being mature enough to take on a loan is laughable - not to mention that the person involved here is unlikely to be terribly well-educated if he was working enough at 16 to be considered for a loan.  I really think this could be a wind-up though - it just doesn't look right.


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## Luternau

I would not assume it's a wind up. Maybe the figures on interest to be paid are so high because there is so much arrears on the loan?
Anyway, my initial though on reading the first post was "how could a 16 yr old get a loan?" Without further information that's still my view.
However, if it's shown/can be proved,  that the contract is void, here is what I would recomend. Obviously the money was borrowed, so it is owed-age irrelevant to taking responsibility to pay it back. What is relevant here, is the legality of the contract terms etc. If it's void, no interest should (or can) be charged on the money advanced. Therefore the full €30 goes against amount owing. The borrower pays the money, the CU get their money. Big lessons learnt by all sides, including guarantors, if relevant.


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## porridge

All, 

Thankyou all for your replys. At the very least, its is good to know that if the details are accurate I am not the only one shocked by this. Unfortunately I don't think this is a wind up. However, based on the relpys, I will find out the exact datails (by looking directly at the paperwook) and post them here. 

From what I have read the details to confirm are the age that the loan was given, the amount of the loan, the amount outstanding, and the interet rate. I will confirm all these.  

Please bear with me while I do this. And thanks again for taking the time to reply.


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## porridge

ALL

Information to hand at the moment:

Amount of loan: €8000. Period of agreement 1.7 years. No. of repayment installments 89. A.P.R 12.74%. Total amount repayable €8851.68. Date the loan was given 06/02/09 when he was 17 years. Agreed repayments at the time were €100 but were then reduced to €30 on the 12/11/09 when he became unemployed. Most recent reciepts show as follows:
DATE:       OPENING BAL:  LOAN:    INTEREST: ARREARS: PAID IN: CLOSING BAL
09/09/10    €4629.49        €5.65      €24.35      €65         €50       €4623.84
14/09/10    €4623.84        €22.40    €7.60        €65         €30       €4601.44
14/01/11    €4502.64        €18.55    €41.45      €275        €60       €4484.09
01/04/11    €4461.59        €0.00      €55.74      €490       €35       €4461.59
Hope this is of some benefit as you can see from these reciepts available to me he is paying more interest every week than money off the loan. He has not always bin able to pay every week and this is why his arrears are on the up. The only income to him is social welfare and he is living at home.


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## SarahMc

Did you find out if his parents acted as guarantors?
What age was he when he took out the original 2,000 loan?


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## porridge

Hi 

His mum was guarantor on his first loan for €2000. He was 16. 

He has a copy of the origional loan application for the €8000 loan. It has no guarantor signature on it. Does this mean he didn't have a guarantor? He can't recall himself. Will ring the Credit Union tomorrow to confirm. 

It is unfortunate that he hasn't kept up even the minimum payments, I hadn't realised this was the case untill I saw his statements.


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## Bronte

porridge said:


> Date the loan was given 06/02/09 when he was 17 years.
> 
> The only income to him is social welfare and he is living at home.


 
Are you sure on the age at Feb 09 (as he is 20 now in April 2011)

What expenses does he have if he is living at home.  As his mother is guarantor is she not worried about he loan.   Does the original guarantee cover not just the initial 2K loan but subsequent loans, check out the document.  Why did he make no payments from Sept to Jan?  Does he have any savings in the credit union.  Does he have any assets he could sell, CD's, TV, motorbike?


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## Phoenix2011

If he was under 18 when taking out the loan it is void. It doesnt matter if he had a guarantor. If his mother gave an indeminty thats a different thing. Check the wording properly. If it was a guarantee, he should write to the CU and say that he is going to stop paying the loan as it is void due to the age when he took it out. If they threaten legal proceedings, let them. No court in the land will enforce such an agreement. I can't believe the CU did this.


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## netz

porridge said:


> ALL
> 
> Information to hand at the moment:
> 
> Amount of loan: €8000. Period of agreement 1.7 years. No. of repayment installments 89. A.P.R 12.74%. Total amount repayable €8851.68. Date the loan was given 06/02/09 when he was 17 years.
> 
> 
> DATE:       OPENING BAL:  LOAN:    INTEREST: ARREARS: PAID IN: CLOSING BAL
> 09/09/10    €4629.49        €5.65      €24.35      €65         €50       €4623.84
> 14/09/10    €4623.84        €22.40    €7.60        €65         €30       €4601.44
> 14/01/11    €4502.64        €18.55    €41.45      €275        €60       €4484.09
> 01/04/11    €4461.59        €0.00      €55.74      €490       €35       €4461.59



Interest on this loan is around €7.60 per week - you can see this when he paid on 09/09 and then again on the 14/09. He is getting charged so much interest cause he is simply not paying every week. Credit union interest goes down every week as long as you pay. If he really was 17 at time of contract it is void, I would advise you strongly to contact citizens advice instead of MABS in this case as I think he has a really good chance of winning a case under capacity to contract. All it takes is a phone call - good luck.


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## SarahMc

I would go to the Ombudsman for Children directly for advice, and to ask them to handle the case if the Credit Union are still insisting on the loan being valid.


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## fosterbush

refer to the criteria that makes a person eligible for the loans for unemployed


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