# How does it work: borrowing too much?



## alaskaonline (30 Jul 2012)

I'm not sure where to put this one into but after reading a few other threads I'm interested in the following:

Josef has already three loans: 2 CC loans worth combined approx.4k, a normal bank loan approx.7k and goes to borrow more money. These three loans are with three different financial institutes.  As he has a CU account with approx. 2400 worth of Shares he goes to borrow 2500, leaving his Shares untouched. A year on Josef decides to borrow another 1500 off the CU and a month later withdraws his entire 2400e in Shares, leaving only his loan in the account. So now he is left with four full loans and apparently no savings/ collateral. He is also working part time and is in receipt of some welfare payments for a number of years incl. at the time when he started borrowing.

Can someone explain the above borrowing concept? Is it really as black & white as in going to these institutions and getting the money when originally he only had 2400e on CU shares? And would the CU pay out those Shares instead of setting them against the loan? I'm not a financial expert so any clarifications are most welcome. I find the above all very confusing and tbh dodgy. Is there a chance Josef has other savings/ collateral that only he and the banks are aware of?


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## Slim (30 Jul 2012)

alaskaonline said:


> I'm not sure where to put this one into but after reading a few other threads I'm interested in the following:
> 
> Josef has already three loans: 2 CC loans worth combined approx.4k, a normal bank loan approx.7k and goes to borrow more money. These three loans are with three different financial institutes. As he has a CU account with approx. 2400 worth of Shares he goes to borrow 2500, leaving his Shares untouched. A year on Josef decides to borrow another 1500 off the CU and a month later withdraws his entire 2400e in Shares, leaving only his loan in the account. So now he is left with four full loans and apparently no savings/ collateral. He is also working part time and is in receipt of some welfare payments for a number of years incl. at the time when he started borrowing.
> 
> Can someone explain the above borrowing concept? Is it really as black & white as in going to these institutions and getting the money when originally he only had 2400e on CU shares? And would the CU pay out those Shares instead of setting them against the loan? I'm not a financial expert so any clarifications are most welcome. I find the above all very confusing and tbh dodgy. Is there a chance Josef has other savings/ collateral that only he and the banks are aware of?


 
Unfortunately, this scenario was not unheard of in the Tiger times. In relation to the credit union, in Ireland, Josef would not be allowed to reduce his shares(savings) below 25% of what he owes them, unless to set it off against the loan. If this is a scenario someone has outlined to you, something may be amiss on the information front. Many credit unions are now members of Irish CreditBureau and would not lend so quickly to Josef.


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## alaskaonline (30 Jul 2012)

Thanks Slim. 

Now Josef acquired, especially the CCs and CU loan, in the last 24 months i.e. after the boom and withdrew the CU shares a couple of weeks ago. So can it be presumed that Josef has other savings/ collateral elsewhere and he uses it as a guarantee with other financial institutes to borrow more money and take out 100% Shares? As said Josef did take out 100% of the Shares while keeping the full loan of 4k, paying back in weekly installments.


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