# Borrowing My Own Money From CU



## eirman (29 May 2021)

If I have 5K saved and I want to buy a 15K car, I have 2 options .....

*1 >* Borrow 10K from the bank and use my 5K savings.
*2 >* Borrow 15K from the CU (effectively paying interest on my own savings).

With very similar interest rates, option 2 makes absolutely no financial sense at all.
So .... why borrow from a CU, if borrowing from a bank is an option?


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## 24601 (29 May 2021)

Except that you could just do option 1 with the credit union too so your post makes no sense.


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## Brendan Burgess (29 May 2021)

24601 said:


> Except that you could just do option 1 with the credit union too so your post makes no sense.



Unlikely. Most Credit Unions require people to keep 25% of their borrowings in shares. 

eirman's post indicates how stupid this is.

eirman - Option 1 is the best. 

You could reduce your credit union shares to €100 and then apply again for a car loan for the €15k.
They would probably give it to you as they are desperate to lend money.

But if the bank's rate is lower, go with the bank.

Brendan


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## 24601 (29 May 2021)

Brendan Burgess said:


> Unlikely. Most Credit Unions require people to keep 25% of their borrowings in shares.



This is a myth, the vast majority of credit unions have moved away from this practice.

Edit: @Brendan Burgess you might be confusing the "savings-secured" loan offered by many credit unions (and PTSB), which is an entirely different thing, and is mental.


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## Pinoy adventure (29 May 2021)

Paying interest on your own money is madness.it happens a lot that people think the credit unions are helping the customer.they are only helping themselves


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## 24601 (29 May 2021)

Pinoy adventure said:


> Paying interest on your own money is madness.it happens a lot that people think the credit unions are helping the customer.they are only helping themselves


Well by helping themselves they are helping their customers, what with them being member-owned co-operatives.


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## C3PO00 (29 May 2021)

Ptsb are offering a 100% cash secured loan at 6.25% interest


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## Brendan Burgess (29 May 2021)

24601 said:


> This is a myth, the vast majority of credit unions have moved away from this practice.



If they have, I am delighted to hear it. 

I have been saying it for years. 

It's a couple of years since I spoke to a Credit Union manager and at the time, he said that most credit unions had plenty of loans backed by shares. I think it was as high as 33%.

I am glad that this has fallen close to zero.

Brendan


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## Leper (29 May 2021)

Credit Unions have long outgrown of why they were founded. In the days before Credit Unions many people could not get loans from anywhere except from illegal moneylenders where appallingly high interest rates were charged and dreadful outcomes for somebody who defaulted on such loans. This was one reason why I got involved in the founding of two Credit Unions. Back in the 1970's the Credit Union Movement was expanded in the UK especially amongst the non white community.

Get one thing straight:- Nobody in Credit Unions is borrowing his/her own money. Yes, his/her own money (savings/shares) is being used as indications of how much one can save and a little wall against defaulting. Never forget the Credit Unions kept many a family from penury.

OK! they've got very big and flashy - but they gave loans to many whom the banks treated as financial lepers. Banks became big and flashy too, too big and too flashy.

Quotable Quote from Leper:- If you have designs on where you're heading, never forget from where you came. Keep supporting your local Credit Union.


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## Brendan Burgess (29 May 2021)

Leper said:


> Get one thing straight:- Nobody in Credit Unions is borrowing his/her own money.



Leper

While I am sure that the two credit unions you founded were customer friendly, the vast majority are not or were not. 

They give what they call "secured loans".

People have €20k in shares and they need €15k, and they go off and take out a loan for €15k instead of withdrawing €15k. 

Up until very recently, most credit unions required someone with say €5k who wanted to buy something for €20k to borrow the €20k.

So these people are borrowing their own money.

Brendan


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## Leper (29 May 2021)

Brendan Burgess said:


> Leper
> 
> While I am sure that the two credit unions you founded were customer friendly, the vast majority are not or were not.
> 
> ...


Brendan, Here we go again. Semantics are just that - Semantics. Nobody is borrowing their own money in Credit Unions. The amount on deposit acts against defaulting and Credit Unions were founded not to give out loans that would not be repaid. Whatever Credit Unions are, they are not charities. They are "small businesses" that must put back any profit into the "business." Many people work on a voluntary basis for Credit Unions; even I used to.

Please note I never founded any Credit Union; I was merely involved in the setting up of two Credit Unions in different cities. Both are still in existence although on a much larger scale.

Can I bring you back to the 1960's and 1970's where many people took out loans through illegal money lenders who charged exorbitant interest rates plus add-ons for extending loans etc? These scum lenders even commandeered the Childrens' Allowance books of their victims. On the 1st Tuesday of the month they'd stand outside post-offices hand the CA book to the victim who received due money from the Post Office and paid the next instalment of their debt to the illegal money lender who immediately took possession of the Childrens' Allowance book again.

It was the Credit Union movement that single handed put an end to this appalling practice. This was one of the main reasons as a voluntary young trade union activist I got involved in first setting up a Credit Union. This is only one story of many I could tell.

Now for my semantics - Remember the banks would not give a loan to anybody unless the person proved he didn't need the loan - strange but true. Many people were depending on illegal money lenders. My blood boils every time I think of their dreadful practices and were held in some kind of decent esteem because their victims couldn't borrow money elsewhere.


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## Brendan Burgess (30 May 2021)

OK Leper 

Park the Credit Union propaganda for the moment to focus on the question asked by the OP.

I have €10,000 in cash sitting on the kitchen  table. 
I want to buy a car for €10,000.
I go out and give the seller €10,000 and drive away in my new car. 

You have €10,000 cash.
You go into ptsb and put it into an account which pays you no interest and which you cannot withdraw it from.
They lend you the €10,000 to buy the car and charge you €700 a year interest.

Are you borrowing your own money or is that just "semantics"? 

"Semantics" will make you a very poor person.

Brendan


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## Leper (30 May 2021)

The following might be irrelevant to this thread but just on some points of information I'll say the following:-
1. Back in 1970, I returned from working in the UK (where CU's prospered especially amongst the Irish and non white communities) and as a young unpaid trade union rep saw the need and the viability of a Credit Union for my fellow low grade public servants. In a nutshell we couldn't get credit from the banks. I was still in my teens and some of the people with which I was working shared my thoughts and a committee was set up to explore the forming of a Credit Union. Let me be first to say:- We hadn't a clue and found the battleground of low finance to be daunting. Even words like "debit" caused confusion to us (I bet you think I'm joking, but I'm not). Somehow our Credit Union got off the ground. Problems where there to be solved and somehow we resolved them. Some bank workers helped too and even they recognised their internal jargon "It might not be in the interest of the bank to offer loans" to the like of us. 

2. Legal Money Lenders:- (I'm not mentioning the banks as they wouldn't give us credit anyway). Most were local business people who saw the need to lend money and the high profits to be made in the process. They charged high interest rates and had people working for them. What they did was marginally above the line but at least they gave loans to people the banks wouldn't touch. Some of the Legal Money Lenders ran shops (usually furniture shops) and sold items people needed and gave loans to people if they bought items in the shops. Hence more profit again - but good business sense from their point-of-view. 

3. Illegal Money Lenders:- I was surprised at some. They were housewives, electricians, public-servants, bus-conductors etc. Usually, they operated alone and gave relatively small loans to people who hadn't the acumen not to get involved. These victims couldn't get credit anywhere else. Childrens' Allowance books were illegally possessed as a means of Credit Management. Many collection methods included strong-arm stuff at worst and less strong-arm sitting in a car outside of the victim's house continuously and loudly blowing the horn until somebody came out and agreed to another method of paying (usually at a higher cost). From interviews I have given to university students of finance they were unaware of such practices. 

Ireland had just become a member of the EEC; things were different and needed change. Irrespective of the modern banks Backing Brave and Drop-in-for-a-Chat-we-can't-be-shocked etc the banks had no interest* in low earning people. 

*Pun intended


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## Leper (30 May 2021)

Brendan Burgess said:


> OK Leper
> 
> Park the Credit Union propaganda for the moment to focus on the question asked by the OP.
> 
> ...



Thanks Brendan for suggesting what I should do and again I see your semantics still obtain ("propaganda" etc) and that's OK, you own the forum and can take your ball home at any time.

Yes, what you say makes some sense and is relative to people who have access to earning good money. If you have easy access why borrow? It makes good business sense not to borrow. (You see, we agree on some points).

You're a low earner and life suggests you will need more loans in the future. You don't have the "reddies" in the biscuit tin under your bed. You need to foster good business sense with people who will give you those loans. Credit Unions can fill that need. Whatever way you look at it, you need to keep some money with them. Like I said in a previous post there is a need to show you can save something as Credit Unions are not charities.

Once again I respectfully say you are not borrowing your own money; that's there for your future use.

"Semantics" - Yes, I'm not rich, but I plough on and hope when the Judgement Day comes my performance will receive a favourable outcome. I hope I'm seen as the Leper who gave thanks.


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## LS400 (30 May 2021)

I had one of my brain waves a few weeks ago, I thought I would spend some money on the house and garden, I joined the CU a couple of years ago and have about 8k with them, I called them up, never having borrowed from them before to ask what’s the procedure in taking out a small loan, about €15k would do, so I really only needed 7k. 
Told them what it was for.
Not a problem, but I need to borrow the €15k and leave the 8k in the account, crazy, why would I do that when I only need 7k

The Op has a valid question.

Leper, your a great talker alright, and I like you posts, but your a bit like a politician on this, answering a completely different question.

Your answer is in reply to “is there a need for credit unions” But no one has asked that.


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## Leper (30 May 2021)

LS400 said:


> I had one of my brain waves a few weeks ago, I thought I would spend some money on the house and garden, I joined the CU a couple of years ago and have about 8k with them, I called them up, never having borrowed from them before to ask what’s the procedure in taking out a small loan, about €15k would do, so I really only needed 7k.
> Told them what it was for.
> Not a problem, but I need to borrow the €15k and leave the 8k in the account, crazy, why would I do that when I only need 7k
> 
> ...


Nice post LS400 and I can see what you are saying. Yes, I'm a good talker and the Burgessmeister is the kind of guy I'd enjoy entertaining on our terrace in Spain while looking at the Mediterranean waves lapping against the beach. You're borrowing €15K and have €8K in CU Shares. Great! A good place to be. If you never need another loan you'd be stupid not to use your CU Shares.

But, life is strange and you may need loans in the future. In that case you might be eventually better off to accept the €15K loan.

Do we need Credit Unions?:- If not - Let's close all of them pronto then! - I'm heading into my 70's, it won't affect me. Let's give all the lending powers exclusively to the banks; I'm sure they'll cover themselves in glory like they did in the early 2000's.

PS:- LS, you're welcome on our Spanish terrace too.


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## Brendan Burgess (30 May 2021)

LS400 said:


> Leper, your a great talker alright, and I like you posts, but your a bit like a politician on this, answering a completely different question.


Got it in one!


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## eirman (30 May 2021)

Hi Leper,
I totally accept everything you say regarding legal/illegal moneylenders and the benefits Credit Unions
provide to the general public (especially those who cannot access bank loans).

However, my question was quite specific and did mention that a loan from a bank at a similar interest rate was an available option.
I would pay about *€700 extra* in interest by borrowing 15K rather than 10K (Over 3 years @ 8.6%).


*Credit unions need to ...*

Reduce their lending rates (to say, nearer 5%)
Increase deposit interest rates (when the new attractive lending rate increases lending).
Greatly reduce the collateral share requirements when lending (so one doesn't need to borrow ones own money).


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## MrUpward (30 May 2021)

Brendan Burgess said:


> OK Leper
> 
> Park the Credit Union propaganda for the moment to focus on the question asked by the OP.
> 
> ...


Hold on, auto loan notes are carrying 6-7% interest rates in Ireland? Is this for the subprime market or a prime borrower?  What rates are banks and credit unions paying to depositors?  I ask because rates are historically low virtually everywhere and 6-7% is absurd in a world where one can borrow a million at 2-3%.  I would expect depositors to get 2-3% on their bank deposits if 6-7% is what is charged on a small value loan.


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## Pinoy adventure (30 May 2021)

Leper said:


> Thanks Brendan for suggesting what I should do and again I see your semantics still obtain ("propaganda" etc) and that's OK, you own the forum and can take your ball home at any time.
> 
> Yes, what you say makes some sense and is relative to people who have access to earning good money. If you have easy access why borrow? It makes good business sense not to borrow. (You see, we agree on some points).
> 
> ...




Myself and 12 of my family members are in our local credit union the best part of 20 years and save weekly with them.
In the last 12-24 months I approached them wanting too borrow €25,000.my father agreed too go guarantee for loan if need and I had about 6-8k with them.the loan went too the committee and they said no.

I've borrowed thousand off them over the years and never missed a payment and have even borrowed my own money as a loan within shares where I had more savings than I needed and still borrowed and paid interest on the loan,yet they still refused me a €25,000 loan,so in some cases they can't fulfill the needs of its members


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## Gordon Gekko (30 May 2021)

They’ve changed fundamentally. The Central Bank seem to have greater oversight and they’re undertaking more stringent credit checks on their members. So it makes no sense for them to charge 10% on a loan, as my credit union does.

As for “borrowing one’s own money”, I do it all the time on the basis that we’ve an emergency fund in the credit union but occasionally borrow money.


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## NoRegretsCoyote (31 May 2021)

24601 said:


> This is a myth, the vast majority of credit unions have moved away from this practice.



If it's a myth, then why have two posters claimed that CUs have demanded recently that they leave their deposits in place in order to borrow?



LS400 said:


> Told them what it was for.
> Not a problem, but I need to borrow the €15k and leave the 8k in the account, crazy, why would I do that when I only need 7k





eirman said:


> However, my question was quite specific and did mention that a loan from a bank at a similar interest rate was an available option.
> I would pay about *€700 extra* in interest by borrowing 15K rather than 10K (Over 3 years @ 8.6%).



If this is any way widespread then it's propping up credit unions' loans-to-assets ratio which is already very low at just 26%.


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## 24601 (31 May 2021)

NoRegretsCoyote said:


> If it's a myth, then why have two posters claimed that CUs have demanded recently that they leave their deposits in place in order to borrow?



It's a myth that this is widespread and all we have here is two anecdotes. There are some backward credit unions that still operate in this manner but they are the exceptions to the rule. Those credit unions should definitely be avoided in my view, although this is complicated by the reality that the banks do not lend to a lot of people that credit unions do. If these people can't get loans from their credit union they will likely end up going to moneylenders. 

This should really be seen as a consumer protection issue in the credit unions that insist upon large amounts of savings as collateral as a matter of course. It would be useful if all credit unions published their policies in relation to this to ensure full transparency. The ones that do publish information on it are usually doing it to highlight that they do not implement such practices.


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## Leper (31 May 2021)

24601 has made some good points. Back in the day when the two CU's with which I was involved in their early stages of getting off the ground, we begged members to buy more shares in order to meet the demand of loan applications. We asked that family members of our membership would take out Share Accounts. We wanted our clients to leave the loans go full distance and not to repay early.  Also, we begged people receiving loans to maintain their shares and add where possible. Like I said earlier, we hadn't a clue in such practice. Simply, we couldn't match the amount of loans with the demand. 

I could write reams about the huge amount of people depending on illegal and legal money lenders then. To say the least it was frightening and I'm not going to post the details as some on here would see it as mere "propaganda." However, I will say I received many threats from illegal money lenders including one as I exited church one Sunday morning from who I regarded as Cork's greatest hypocrite. Illegal moneylending was such a problem back in the 1970's that we formed a cute plan for our CU members in repaying illegal money lenders simultaneously, ensuring no more illegal loans were accepted or sometimes even offered. 

CU's do not have cheap interest rates, but interest is added only to the amount unpaid on the Principle, so interest reduces as you pay. I say this as many are not aware of such practice.


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## NoRegretsCoyote (31 May 2021)

Leper said:


> Simply, we couldn't match the amount of loans with the demand.


That was then, this is now!

Only a quarter of credit unions' assets are in the form of loans to members now. They are swimming in deposits that they can't lend out.


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## eirman (31 May 2021)

Leper said:


> CU's do not have cheap interest rates, but interest is added only to the amount unpaid on the Principle, so interest reduces as you pay. I say this as many are not aware of such practice.


Are saying that banks charge full interest on the original sum borrowed
until the last repayment is made?  What about APR?

EDIT:
Leper, I did some online comparison of the total interest paid with CU vs Bank loans.
Banks are *exactly* the same as CUs.   Interest reduces as you pay off the Principle, so credit unions do nothing special.
To imply otherwise, is to propagate false CU propaganda.


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## Leper (31 May 2021)

Apologies Eirman, if I steered you in the wrong direction.


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## Paul O Mahoney (31 May 2021)

Leper said:


> Apologies Eirman, if I steered you in the wrong direction.


Well done Leper for all your work in Cork it really made life a little bit easier,  I got my first bike from Barbers because one of the CUs in Cork that you and countless others gave their time to create something that helped so many people and families. 

Unfortunately the ethos in them and in society in general has changed and the promotion of thrift and saving doesn't matter nor that community finance was for the community. 

In 10 years our CUs will go down the was the S&Ls in the US went in the late 80s.


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## Brendan Burgess (31 May 2021)

Leper said:


> Apologies Eirman, if I steered you in the wrong direction.



Not your fault Leper. It's part of the CU propaganda. They stress this and imply  that the other lenders do something different.  Many of you are fooled by it.

Brendan


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## Monbretia (31 May 2021)

Yes but while a straight forward bank loan does calculate on a decreasing balance Hire Purchase agreements don't so the comparison in interest calculation between a CU car loan and a HP agreement is valid, not forgetting that most people who can get a car loan from a bank will do so.   CU & HP would most definitely be the next rung down for those maybe not able to get bank loan.   Don't know how the PCP works these days.

It's not that long ago that all enquiries for car loans in banks would be referred on to their other entity that dealt with the like Bank of Ireland Finance/Lombard for Ulster are two that come to mind, I think at the time their loans were front loaded too.


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## Paul O Mahoney (31 May 2021)

Brendan Burgess said:


> Not your fault Leper. It's part of the CU propaganda. They stress this and imply  that the other lenders do something different.  Many of you are fooled by it.
> 
> Brendan


Really Brendan " propaganda" or marketing? I doubt thousands of volunteers in the CU movement are propagandists. 

Bit harsh using that description. 

Well if interest is now calculated the same way it certainly wasn't the CUs that changed. 
And to echo others you are not paying interest on your own money, you are paying interest on the loan that was taken out. This is exactly the same if you had savings in a bank and took out a loan .

I'm surprised that people think the most important thing to compare is simply interest on loans while ignoring that CUs don't borrow billions in cheap money from a failed global financial system and didn't wreck the economy or have the government as major shareholders multiple times.

Yes the movement still needs improvement but to say they are employing propaganda is disrespectful.


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## Gordon Gekko (31 May 2021)

Ah come on Paul, I’m a credit union customer, but their messaging is propaganda. All that for the community nonsense and in reality they’re charging people 10% interest but now applying normal banking criteria.


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## Brendan Burgess (31 May 2021)

Paul O Mahoney said:


> This is exactly the same if you had savings in a bank and took out a loan .



Absolutely, you would be equally stupid to do that with a bank as you are with a Credit Union. The only difference is that banks do not insist that you keep your savings with them in order to take out a loan. 

Some Credit Unions do.

Brendan


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## Brendan Burgess (31 May 2021)

Paul O Mahoney said:


> CUs don't borrow billions in cheap money from a failed global financial system and didn't wreck the economy or have the government as major shareholders multiple times.



More CU propaganda I am afraid.

We did not bail out the banks.

We bailed out their depositors.  If we had not done so, most of the credit unions would have gone bust.

So it's more correct to say "We bailed out the Credit Unions" than "We bailed out the banks." 

Brendan


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## Brendan Burgess (31 May 2021)

"propaganda" or "marketing"? 

When it comes from a group imbued by an arrogant belief that they are always right and everyone else is always wrong and that everyone else is responsible for their failure to lend money, I think it's propaganda and not marketing. 

Brendan


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## Paul O Mahoney (31 May 2021)

Gordon Gekko said:


> Ah come on Paul, I’m a credit union customer, but their messaging is propaganda. All that for the community nonsense and in reality they’re charging people 10% interest but now applying normal banking criteria.


Is "propaganda" the correct word though?  CUs are cooperatives and probably the greatest,  in my view, financial movement this country has ever seen. 

I'll fully admit they have issues and perhaps 20 years ago they should have been a bit more strategic in fitting their financial products into the mainstream and using the leverage they had to become a better finance option for people.


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## Paul O Mahoney (31 May 2021)

Brendan Burgess said:


> "propaganda" or "marketing"?
> 
> When it comes from a group imbued by an arrogant belief that they are always right and everyone else is always wrong and that everyone else is responsible for their failure to lend money, I think it's propaganda and not marketing.
> 
> Brendan


Ok


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## Leper (31 May 2021)

I think I'll bow out of this thread.


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## Brendan Burgess (31 May 2021)

Paul O Mahoney said:


> CUs are cooperatives and probably the greatest, in my view, financial movement this country has ever seen.



Hi Paul

I would love to see Credit Unions reform themselves and become about customers rather than being about the boards who run them. I would love to see them developing a policy of treating customers fairly rather than being wedded to ideas developed 100 years ago. 

I am a great believer in mutuals. 

But good people get nowhere in the movement. They are treated as heretics and give up in despair.  So the same people populate the boards and like nothing better than heading off to conferences around the world. 

It is a terrible pity.

For example, I would love to see them shifting their excess cash into a Building Society and really bring in competition to the mortgage market. But no, each credit union wants to give out mortgages themselves although they have no experience and are not big enough to do so.

Brendan


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## 24601 (31 May 2021)

Gordon Gekko said:


> All that for the community nonsense and in reality they’re charging people 10% interest but now applying normal banking criteria.



They're definitely not applying "normal banking criteria" - credit unions are far more forgiving than the banks are and would, by and large, have a more flexible approach to underwriting. They also have to generate a surplus to keep the lights on, and are very limited in what they can do in the current environment without handing back most of the savings they have to members and filleting their branch network. When they do these things they are accused of being just like the banks. It's a lose-lose for them.


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## Gordon Gekko (31 May 2021)

My local credit union lend at 10.5%. If you’re a new member and want to borrow, say, €15k, you probably need to leave around €5k on deposit. But once you’ve a track-record, you don’t. If they reduced their rates to something more reasonable, say 6.25%, they’d be out the door. Charging 10.5% when they do actually turn people down these days is ridiculous.


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## 24601 (31 May 2021)

Gordon Gekko said:


> My local credit union lend at 10.5%. If you’re a new member and want to borrow, say, €15k, you probably need to leave around €5k on deposit. But once you’ve a track-record, you don’t. If they reduced their rates to something more reasonable, say 6.25%, they’d be out the door. Charging 10.5% when they do actually turn people down these days is ridiculous.



Your credit union is more expensive than the typical credit union. It's also cheaper than PTSB, so go figure. 

I don't think reducing their rates would have much impact to be honest. The consumer credit market has shrunken considerably and their share of the market has remained stable and even increased in spite of the perception of them being more expensive than the banks. Their big issue is that shrinkage in demand for consumer credit. Most credit union customers aren't particularly price sensitive so they'd be on a faster hiding to nothing with lower interest rates.


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## Monbretia (31 May 2021)

24601 said:


> They're definitely not applying "normal banking criteria" - credit unions are far more forgiving than the banks are and would, by and large, have a more flexible approach to underwriting. They also have to generate a surplus to keep the lights on, and are very limited in what they can do in the current environment without handing back most of the savings they have to members and filleting their branch network. When they do these things they are accused of being just like the banks. It's a lose-lose for them.



Totally agree with this, they may have more stringent banking criteria now but you will always get a hearing at a credit union, it's not just 'computer says no', many people have good explanations for past blips on their record and you will at least be able to have your case listened to and usually discussed by the Credit Committee to come to a decision.   It's far more human and in house than any bank branch even with new rules or at least it was when I was involved with one a few years back.

I have been on Committees and been on the Board of a CU and don't recognise the structure Brendan is talking about on boards, not saying it doesn't exist and I do only have experience of one but I certainly didn't see anyone there just for a foreign trip!    There was a hell of a lot of work involved and I actually gave up after 2 yrs because of the demands on time and needing to keep up with regulations etc, I could hardly even keep up with the emails!     And all of that for nothing but the good of your health!    I could see why some of the retired people on the board did it to keep the brain ticking over and maybe the social aspect of getting out but anyone holding down a job as well as dealing with the workload is asking a lot of people for a couple of freebie dinners a year and a platter of sandwiches at the meetings!

I worked in banks for 30 yrs and in my innocence knew nothing about money lenders etc when I became involved in another financial area that eventually led me to volunteering in the CU but I think anyone that can easily get a regular bank loan when they want does not really 'get' what it's like to be on the other side and the CUs have definitely played a huge part for that market.  Where they go in the future though I don't know.


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## Paul O Mahoney (31 May 2021)

Monbretia said:


> Where they go in the future though I don't know.


That's the question.


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## Paul O Mahoney (31 May 2021)

Monbretia said:


> Totally agree with this, they may have more stringent banking criteria now but you will always get a hearing at a credit union, it's not just 'computer says no', many people have good explanations for past blips on their record and you will at least be able to have your case listened to and usually discussed by the Credit Committee to come to a decision.   It's far more human and in house than any bank branch even with new rules or at least it was when I was involved with one a few years back.
> 
> I have been on Committees and been on the Board of a CU and don't recognise the structure Brendan is talking about on boards, not saying it doesn't exist and I do only have experience of one but I certainly didn't see anyone there just for a foreign trip!    There was a hell of a lot of work involved and I actually gave up after 2 yrs because of the demands on time and needing to keep up with regulations etc, I could hardly even keep up with the emails!     And all of that for nothing but the good of your health!    I could see why some of the retired people on the board did it to keep the brain ticking over and maybe the social aspect of getting out but anyone holding down a job as well as dealing with the workload is asking a lot of people for a couple of freebie dinners a year and a platter of sandwiches at the meetings!
> 
> I worked in banks for 30 yrs and in my innocence knew nothing about money lenders etc when I became involved in another financial area that eventually led me to volunteering in the CU but I think anyone that can easily get a regular bank loan when they want does not really 'get' what it's like to be on the other side and the CUs have definitely played a huge part for that market.  Where they go in the future though I don't know.


Sorry hit wrong button


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## Cavanbhoy (1 Jun 2021)

Brendan Burgess said:


> Absolutely, you would be equally stupid to do that with a bank as you are with a Credit Union. The only difference is that banks do not insist that you keep your savings with them in order to take out a loan.
> 
> Some Credit Unions do.
> 
> Brendan


Brendan, 
Can only speak for a credit union I am involved in we do not require members to hold there savings against loans.
I agree with you in regard secured loans being bad value
Eg secured loan 5%
Non secured loan 7.5% rate
But it is not a necessity to take a secured loan but some members do.


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## Ordinary User (1 Jun 2021)

24601 said:


> This is a myth, the vast majority of credit unions have moved away from this practice.
> 
> Edit: @Brendan Burgess you might be confusing the "savings-secured" loan offered by many credit unions (and PTSB), which is an entirely different thing, and is mental.


I borowed money from CU to buy a car and 25% of debt on my share account was held as a security. I wasn't offered any other deal and I'm not aware of any borrowings that wouldn't be secured on savings. but perhaps it's just my CU.

@eirman you must bear in mind that with CU car loan interest depends wheter you buy from dealer (must provide an evidence) or private seller (then it becomes a personal loan with a higher rate).

With option one you are left with a car and a debt. Option two makes sense from cashflow perspective, as you get your car, have new debt, have 1.25k emergency fund (assuming 25% secured on your share account) and 3.75k to be released when you pay off your debt (you can and should pay it earlier to reduce your cost of debt).

The interest earned on savings is so small that it wouldn't bother me to pay interest on my own savings as you state here.


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## Brendan Burgess (1 Jun 2021)

Ordinary User said:


> The interest earned on savings is so small that it wouldn't bother me to pay interest on my own savings as you state here.



Hi OU

I don't understand this.

Can you explain what you mean and maybe illustrate with an example?

Brendan


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## Pinoy adventure (1 Jun 2021)

OU 

A lot of credit unions no longer pay interest or dividends on shares


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## jpd (1 Jun 2021)

How could they - most of their funds are lodged in bank accounts and they have to pay interest to the banks for the privilege

Whatever interest income they earn from their loans to members has to pay their costs (salaries, insurance, rent, etc etc)


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## Paul O Mahoney (1 Jun 2021)

Cavanbhoy said:


> Brendan,
> Can only speak for a credit union I am involved in we do not require members to hold there savings against loans.
> I agree with you in regard secured loans being bad value
> Eg secured loan 5%
> ...


Would that example not mean that you're savings being used as security is actually generating a small return by allowing the borrower to enjoy a lower interest rate, and by extention lower repayments?

Or am I missing something?


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## Pinoy adventure (1 Jun 2021)

Leper - would you have any say on why staff members of the credit unions are able too get loans at a much cheaper rate than customers ?


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## Ordinary User (1 Jun 2021)

Brendan Burgess said:


> Hi OU
> 
> I don't understand this.
> 
> ...


Hi, yeah, this bit wasn't clear. The way I see this is that there's no such thing as paying an interest on your own savings with CU - it's simple security charge on your asset (cash) and I see no issue here, but in this thread it was called as paying interest on your own savings - perhaps I misunderstood this - savings should be earning interest for you rather than generating cost. Realistically 5k in CU will earn nothing so if some is risk adverse like me it's better to go with option two and have a charge on share account amd still have access to some of the funds. Does this make sense?


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## jpd (1 Jun 2021)

But do you have access to your funds if the CU requires you to keep them on deposit?


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## Leper (1 Jun 2021)

Pinoy adventure said:


> Leper - would you have any say on why staff members of the credit unions are able too get loans at a much cheaper rate than customers ?


When I was involved back in the day all loans through the two CU's carried the same rate whether they were for staff or clients to the best of my knowledge.


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## Cavanbhoy (1 Jun 2021)

Paul O Mahoney said:


> Would that example not mean that you're savings being used as security is actually generating a small return by allowing the borrower to enjoy a lower interest rate, and by extention lower repayments?
> 
> Or am I missing something?





Leper said:


> When I was involved back in the day all loans through the two CU's carried the same rate whether they were for staff or clients to the best of my knowledge.


The credit union I am involved in there is no difference in rates charged, I am not 100% sure but imagine it might even be against the rules to charge diff rates on the same class of loan.


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## Ordinary User (1 Jun 2021)

jpd said:


> But do you have access to your funds if the CU requires you to keep them on deposit?


not until u pay the loan back. in the above scenario 5k is in share account and 15k is needed. assuming that CU will restrict 25% of loan amount, 3.75k will be unavailable until the loan is paid. he will still have acces to the reminder i.e, 1.25k


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## BoardsieKKV (1 Jul 2021)

I used my local Credit Union a lot growing up. My CU is Drogheda Credit Union, and they've been taking over other smaller CU's in recent times, so they seem to be doing relatively well and would be perhaps one of the larger ones. As far as I know, most (all?) CU's follow the same general rules.

When it comes to lending, if you have savings, your savings _are _secured against the loan. Sometimes they won't require the whole lot if you mention it to them, but by default they are entirely secured to the loan.

My CU has two loan products, as a result. A standard loan (8.9%) and what they call a "Special Savers" loan (5.9%). You qualify for the Special rate, if you are borrowing an amount of money that is less than your savings. (ie; if you have 5k saved, and get a loan of 2k).

If you have 5k saved, and borrow 10k, you pay 8.9% on the entire amount, however, once the balance of the loan is lesser than your shares, your interest rate swaps to the lower rate of 5.9%.

So you absolutely are paying interest on your own money. However, they do stress these days that a loan application is decided on your ability to repay, and not your shares, so i presume you can talk them out of securing your shares, however, as i say above, the 'default' method seems to be to secure your shares.

There is something to take into consideration here though in relation to your shares: If you have shares with the CU, you will get some 'free money' if you die as they have insurance in place that'll match your savings, up to €7,700. Of course, for someone in their 20's buying a first car, this is likely not a great concern, but worth a mention, nonetheless.


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## ClubMan (2 Jul 2021)

BoardsieKKV said:


> There is something to take into consideration here though in relation to your shares: If you have shares with the CU, you will get some 'free money' if you die as they have insurance in place that'll match your savings, up to €7,700. Of course, for someone in their 20's buying a first car, this is likely not a great concern, but worth a mention, nonetheless.


I tried to get info from my CU about what different "free" insurance cover they offered (the first 3-4 listed here: https://www.creditunion.ie/what-we-offer/insurance/) and the terms and conditions that applied and they basically refused and said they they couldn't give this info to me. Go figure...


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## ClubMan (2 Jul 2021)

Ordinary User said:


> not until u pay the loan back. in the above scenario 5k is in share account and 15k is needed. assuming that CU will restrict 25% of loan amount, 3.75k will be unavailable until the loan is paid. he will still have acces to the reminder i.e, 1.25k


It's also possible (albeit with difficulty in my experience) to reduce the amount required to be held on deposit/in shares in line with the reducing balance of the loan. So that it's always only 25% (or whatever) of the outstanding balance and not of the original principal.


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## Salvadore (16 Jul 2021)

When the loan balance reduces to the amount of savings held, it’s possible of course to offset one against the other, thus reducing both the term of the loan and the amount of interest paid.


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## ClubMan (6 Aug 2021)

Salvadore said:


> When the loan balance reduces to the amount of savings held, it’s possible of course to offset one against the other, thus reducing both the term of the loan and the amount of interest paid.



I had to fight tooth and nail on behalf of somebody else to get their CU to do this a few years back.
I hope that it's easier to do these days!


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