# CU won't accept a lump-sum in full settlement of a guaranteed loan



## brady.ie (9 Nov 2016)

Hi,
Apologies in advance for a long post and I hope this makes sense.

Borrower had a credit union loan granted in 2007 over a term of 10 years (120 monthly repayments). 
Loan amount was for circa €50k.
As per initial Credit agreement total amount repayable was:
       Loan amount ~50K plus cost of loan ~28K. Total ~€78K.

Over the term of the loan the borrower has had various financial difficulties: - unpaid maternity leave, being let go from job, reduced wages, childcare costs etc. Following consultation with the CU they agreed to reduced payments on the loan. 
After years of unimproved financial circumstances the CU has used borrowers share balance to clear arrears on the loan and have recently stopped charging interest.

Borrower's partner is now being made redundant. With the redundancy payment they wish to clear their debts. Contact was made with CU to explain position and try to agree a figure to close the account. 
Total repayments on loan so far are ~€55k. Borrower offered to pay CU €23K (to repay to the total loan as per the Initial Credit agreement) and within the 10 year term of the loan.
CU are looking for €31K due to interest accrued due to non payment of full payment installments during the course of the loan. 

Does the borrower have any grounds for seeking to only pay the €23k outstanding as per the initial agreement? The Borrower's partners redundancy will not cover €31k that the CU are looking for. The CU have said that they will accept the €23k but there will be an outstanding loan of €8k which will still need to be repaid.

Borrower feels that since the Total Amount Repayable as per the Initial Credit agreement is being paid and within the Period of the agreement (albeit not as per the repayment schedule agreed) that this should suffice.

Any thoughts welcome.


----------



## Brendan Burgess (9 Nov 2016)

brady.ie said:


> Does the borrower have any grounds for seeking to only pay the €23k outstanding as per the initial agreement?



No, this is not a valid argument.  That figure represents the interest you would have paid had you met all your repayments on time. You didn't do so. Therefore, your balance was higher so you were, correctly, charged more interest. 

Are you insolvent?   Do you have a home or mortgage?   If you are insolvent, there isn't much that the credit union can do about it. You should consider bankruptcy and the CU will get nothing. 

Alternatively, you should consider a Personal Insolvency Arrangement. 

Your partner should only get involved if you are getting a huge write-down. 

Brendan


----------



## elcato (9 Nov 2016)

Well I would make an offer of the 23k as you outlined and as a final offer. Remember the partner did not get the loan and it seems to me the CU are just trying to squeeze as much as they can.


----------



## brady.ie (9 Nov 2016)

Hi Brendan, thanks for the reply.

Both the borrower and partner own a house together (in negative equity of about €70k). A mortgage reschedule has been arranged and full repayments are being made.
In relation to the CU loan, the borrowers mother is a guarantor on the loan and she has been refused access to her account due to the outstanding debt on the loan.

The borrower has a good job, (circa €45k pa), and partner had a good job until redundancy but hopes to get work fairly quickly, (would have been on  circa €58K p.a.). Due to very poor decision making, a serious lack of understanding of the implications of overspending years ago and easy access to credit, the couple racked up large debts. Total still outstanding is approx €90k excluding mortgage. For the past 8 years they have being paying back outstanding debts as best as possible taking into account the financial difficulties laid out above.

The hope was to at least pay off this Credit Union loan and some other loans from the redundancy payment and start to work towards getting to a debt free life.
Both understand their responsibilities in relation to their debts and neither wish to walk away from debts but would like some flexibility when trying to come to a settlement.


----------



## brady.ie (9 Nov 2016)

Hi Elcato,
They made an offer to the CU for the €23k. CU said they would accept that and open a new loan for the remaining €8k. No flexibility other than that. Agree the CU seem to be trying to squeeze as much as they can get (I suppose that's their job). 
The partner is involved as they wish to work towards a debt free life and had hoped that a lump sum settlement would have been possible.


----------



## Brendan Burgess (10 Nov 2016)

Hi brady

It seems to me that the CU is being entirely reasonable here. 

He took out the money and his mother guaranteed it. That is the way the CU works. They often lend money on the basis of guarantees. 

While his partner is not responsible for the borrower's debts, his mother is.  Either way, the CU will be repaid their money. 

Whether the partner should use her money to bail him out is a difficult question.  It's either that or the mother I suppose. 

Brendan


----------



## elcato (10 Nov 2016)

Well I would still approach the C|U again stating that you are something like 4k short after paying all the redundancy and would they accept that as a final offer. As Brendan stated, they are in a strong position but they may facilitate you.


----------



## bleary (10 Nov 2016)

There's plenty of other debt to clear off by the sounds of it? 
If the credit union are currently charging no interest and are intending to continue that and they are unwilling to reduce the current interest bill surely the other debt should be cleared down and the cu loan reduce on the current plan?


----------

