# Help!! Confused and seeking advice on request to Credit Union for funds.



## warrendublin (8 Sep 2015)

Hello,

I am a member of a credit union with Shares of 15,500approx
I have an outstanding loan, never in arrears of 19,000 (it started at 27,000)

I repay a approx 500.00  each month.

I had a credit card bill of approx 2,800.00 and asked the CU if i could get an additional 3,000 from the CU to pay off the credit card bill.

I was told that the CU would not consider advancing this amount until I had paid off half the existing loan - in other words 13,500.

I'm seeking the best course of action here, financially speaking so would hugely welcome any advice.

That said, and from reading on here, am i right in thinking that I can instruct the Credit union to reduce my shares to a particular ratio and use this to reduce my current loan? Is this correct for instance - I ask them to take 10,000 of my shares to reduce my loan to 9,000 whilst leaving 5,500 in shares with them to cover the 9,000 loan? Have I legal right to do this?

Perhaps i'm wrong here!!!

If so, is there an act to which I can point or an area of law that I can use to do this?

Alternatively, is there a way that I can have the credit union accept my request for an additional 3,000 to pay off the credit card and then pay off the Credit union loan.

I repeat, I pay the CU repayments every month, am not in arrears and have been paying down the loan consistently.

Many thanks in advance!


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## Slim (8 Sep 2015)

In law, the CU can reduce your shares to no lower than 25% of the loan balance outstanding. You can ask the CU to transfer any amount against your outstanding balance but to no lower than 25% of o/s balance. However, you can't make them lend you the money. You should write to the board of the CU and ask them to release €2,800 of your shares in order to pay a bill.


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## warrendublin (9 Sep 2015)

Slim said:


> In law, the CU can reduce your shares to no lower than 25% of the loan balance outstanding. You can ask the CU to transfer any amount against your outstanding balance but to no lower than 25% of o/s balance. However, you can't make them lend you the money. You should write to the board of the CU and ask them to release €2,800 of your shares in order to pay a bill.


 Many thanks for this really useful information.

OK so i have two choices as I understand it.

1. Write to the CU and ask them to release 2,800 to pay the Credit Card bill

Have they grounds to refuse my application?

2. Write to the CU and ask them to reduce my loan amount by transferring an amount of shares to reduce the balance (but ensuring taht I leave a minimum of 25% of shares to "match" the o/s balance

Again can they refuse the application and on what grounds

If (and I have a suspicion that they will refuse) they refuse either application(s) do I have any recourse to insisting that they have to let me do either 1 or 2?

Thanks a million.


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## wysiwyg (9 Sep 2015)

Yes. They can refuse you. 

Explain to them that when you got the €27,000 loan they had €15,500 as security, so their risk amount was €11,500. Right now their risk amount is €3,500. You are asking them to EITHER release shares so you can clear your Credit Card bill, or TOP UP your loan. In either option their 'money at risk' increases from €3500 to €6300, and you want to know why they would not entertain this given they were happy to risk €11,500 with you already and your financial circumstances have not changed between the original loan being issued and now (if that is the case)

If you are getting nowhere send in a written appeal to the Credit Committee. If that fails, send in a written appeal to the Board. I can't see why they would refuse you. I'd say 99% of credit Unions would love to help you on this one, unless there is something that you are not revealing on this forum. These appeals are covered in the Credit Union act as amended in 2012

Before you send in any appeals, get a personal copy of your credit report from icb.ie and it will help your case if all debts are up to date.


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## Slim (10 Sep 2015)

Hi again.

It has to be said that many credit unions have rules such as this for 1st time borrowers, i.e. no top ups until half loan is repaid. Experience tells CUs that borrowers who seek to top up before that level is repaid are more likely to become defaulters over time, no offence.  Were you relying on the CU to top up your loan? You don't say how long you have been a member and if you are employed. CUs take several factors into account: length of memebership, savings record, employment status and ability to repay. It is possible that one or more of these factors are worrying them.

I served on a credit union board for 15 years and I have never seen a request such as yours, with your numbers, refused and I would be surprised if it even came to the board. As Wysiwyg says, are you disclosing everything here? If so, and I don't doubt you, then you may be dealing with under par staff/management at the CU. If your credit is good, you could consider getting a loan elsewhere to clear your CU loan and move to a more accommodating CU.


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## warrendublin (10 Sep 2015)

Hi again.

Thanks to everyone for their input. I really appreciate it.

Ok to answer some of the points raised. 

I am employed In middle management in  permanent pensionable employment for 30 years.  Full time. 

Have A  mortgage in joint names just over two years . having moved from a renting position. LTV is 50% at this point. 

I should add that income from separate employment (taxed audited etc)  pays this loan off monthly.

This is what I can't understand.

I Have never defaulted on a loan.  I Have a completely clean credit record.

No skeletons!!!

IIRC I have had a loan before with the CU.

My spouse is also in employment permanent pensionable for almost the same length of time as I.  Full time. 
Many thanks


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## Slim (10 Sep 2015)

Hi Warren, in that case I would write to the Credit Committee of CU and ask for a review of the decision. They meet weekly and may be able to decide quickly. Unfortunately, the board may only meet monthly  and you may need to pay off the credit card bill before they consider your letter.


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## warrendublin (11 Sep 2015)

once again many thanks. I will write and ask for a review of the decision.

However, from reading some other posts on threads here, there is no guarantee that they will or are obliged to amend the decision. So, with that in mind, should the CU refuse to allow me to either

a. "top up" the loan by 2,800
OR
b. withdraw shares by 2,800

then I have another question!!

Providing I keep paying off the loan at the same rate of 500 per month, I believe that when my loan oustanding equals my shares balance at 15,500, I can then tell them to take all my shares as final payment. (Correct?)

If I do this would I be entitled to a a refund of some sort for paying back the loan early (ie would there be interest that I don't have to pay, which has how already factored into my repayments, but now is not required to be paid?)

Or worse still, would I have a penalty for paying the loan back early?!!!

In effect, is there a downside of using my remaining shares to pay off the loan when the loan and my shares become equal?


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## elcato (11 Sep 2015)

warrendublin said:


> If I do this would I be entitled to a a refund of some sort for paying back the loan early (ie would there be interest that I don't have to pay, which has how already factored into my repayments, but now is not required to be paid?)
> 
> Or worse still, would I have a penalty for paying the loan back early?!!!


No. The CU based your repayments on you fulfilling the criteria of paying 500 back each month til it's paid off. If you were to overpay say 1k per month then you would pay less interest. It's just like a mortgage. Overpaying not only shortens the term but also lessens the interest you pay. They do something like charge you interest each day which goes down slightly every month after you pay the 500. Does this make sense ? Have a look at the final post here for how it works for a mortgage loan and it's the same idea.


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## demoivre (11 Sep 2015)

warrendublin said:


> In effect, is there a downside of using my remaining shares to pay off the loan when the loan and my shares become equal?



No downside, you will save on loan interest. The CU is one of the most expensive places to borrow from when you factor in the cost of tying up your funds.


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## Páid (11 Sep 2015)

If the CU won't budge I would use 14300 shares towards paying off the loan, reducing the shares to €1200 and the loan to €4700. At least you would minimise the interest payable to them.


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## Slim (11 Sep 2015)

Páid said:


> If the CU won't budge I would use 14300 shares towards paying off the loan, reducing the shares to €1200 and the loan to €4700. At least you would minimise the interest payable to them.


 But that's the problem. Such a change in shares/loan would be at the discretion of the CU!


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## Páid (11 Sep 2015)

Slim said:


> But that's the problem. Such a change in shares/loan would be at the discretion of the CU!


They cannot refuse to reduce the amount of the loan using shares as I specified above. The can refuse to issue a new loan of 3,000 to pay a credit card bill.


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## Slim (13 Sep 2015)

Páid said:


> They cannot refuse to reduce the amount of the loan using shares as I specified above. The can refuse to issue a new loan of 3,000 to pay a credit card bill.


See this discussion on the topic. I do not know if the issue of discretion has been resolved since.
http://www.askaboutmoney.com/thread...-union-shares-against-your-loan.155464/page-3


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## Páid (14 Sep 2015)

As far as I understand, the Credit Union has not refused the OP to use shares towards the loan (the OP hasn't asked yet) so we don't know if discretion is an issue.


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## warrendublin (17 Sep 2015)

Hi there,
The CU will allow me a facilitation to withdraw 2800 in shares to pay off the Credit Card.

Apparently under Central bank rules they can't allow me another loan/top up until 1/2 the loan has been repaid.

I asked if it was possible to use shares held to reduce the loan amount outstanding, thereby reducing the interest i was paying on it.

I was told this was not possible until my loan and shares were at parity.

As I see it I now have two options:

1. take out the shares and pay off the CC (and clearing that debt)

2. withdraw 3,500 in cash using my CC to establish parity with my loan/shares and wipe out the CU loan in it's entirety.

I'm paying over 100.00 per month in Interest on the loan at this time. On the CC debt i'm paying

Is there a calculator anywhere which would show me how much interst i'd be paying for 6 months if i was to exercise the 2nd option, based on a CC Interest rate of 18.4%


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## Slim (17 Sep 2015)

warrendublin said:


> Hi there,
> The CU will allow me a facilitation to withdraw 2800 in shares to pay off the Credit Card.
> 
> Is there a calculator anywhere which would show me how much interst i'd be paying for 6 months if i was to exercise the 2nd option, based on a CC Interest rate of 18.4%


 
Good for you! I don't have  a link to a 'calculator' but you would pay approx. €53 pm on the cash advance(no grace period) and save €100 int payment to CU. You will lose any insurance etc but many here don't really rate that anyway. There is a lot to be said for being debt free. Good luck anyway, Slim.


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## warrendublin (18 Sep 2015)

Thanks for all the advice everyone.

OK, I've pretty much decided on the following course of action:

1. Pay off the CU loan via a 3,500 withdrawl from my CC (interest rate 22.9%) - this will equate loan to shares and finish the CC loan

2. when 1 goes through, I balance transfer my CC balance to a new CC which has an offer of 0% interest on balance transfers for 6 months on the new CC.

3. Pay off the new CC balance over 6  months.

Is there a problem in doing it this way that i haven't foreseen??

PS - I have one CC with a NIL balance, and another credit card with 2,800 on it - which card should I use to withdraw the cash and then balance transfer (ie is there an advantage of one over the other to use?

As ever many thanks.


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## rob oyle (18 Sep 2015)

One point - paying off your loan with a credit card will mean paying a cash advance fee, which is of the order of 1-2%. Not major if it means clearing up your debt position but just something to note.


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## warrendublin (18 Sep 2015)

Hi Rob

many thanks - I plan to withdraw the cash from ATM(s) and hand it to the CU? Is this more cost effective than using the Card?


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## Brendan Burgess (18 Sep 2015)

Hi Warren 

This is a very interesting case study of the dangers of borrowing from a Credit Union.

You don't tell us the interest rate on the Credit Union loan. I have assumed it is 9% a year or 0.75% a month. If so, then here is how I see it: 







At present you are paying €188 per month on net borrowing of €6,300, which is an effective rate of 36%.

It seems that withdrawing cash from the Credit Card is the best bet. It's bizarre, but I think it's correct. Especially if you can get zero interest on the Credit Card. 

Brendan


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## MrEarl (19 Sep 2015)

Brendan Burgess said:


> ...
> It seems that withdrawing cash from the Credit Card is the best bet. It's bizarre, but I think it's correct. Especially if you can get zero interest on the Credit Card.
> 
> Brendan



I'm surprised that a zero percent interest rate is available on cash withdrawls, as against balance transfers to refinance other credit card accounts, but perhaps it is actually the case.  

Also, taking cash out via ATMs triggers cash withdrawl fees does it not, so there is a cost to consider here ?

A further potential consideration might be if the CC provider will only apply the zero percent rate to the first cash withdrawl or something, so I'd have a very careful look at the terms associated with the zero rate offer and if in any doubt, get confirmation by email / letter.

As you say Mr. Burgess, this is a bizarre situation as under most scenarios, refinancing term debt with credit card debt is not a good idea.


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## warrendublin (21 Sep 2015)

hello everyone,

Sorry for the delay in coming back here!

I can't thank you all enough for the really useful information.  Yes it appears bizarre that I use a CC to pay off a CU loan, (it should be the other way around, but possibly this is another example of how CU's are being restricted/hampered to provide the most cost effective borrowing to their members?

Anyway to clarify

1. One of my CC accounts (currently NIL Balance) will allow me a funds transfer from the CC to my current account with no upfront charge for this - it's an electronic payment to my current account.

2. I've spoken with my new CC provider who have no problem with how the transfer balance on my "old" CC card was arrived at - ie they have no issue with whether it was purchases or cash withdrawl. They're happy to take the balance "as is" and give me an offer of 0% on the transfer balance for 6 months.

3. I think timing is key to this..!!

I have to wait until I get the new card/account set up, I then withdraw the cash/EFT from the old CC, go to the CU and pay off the CU loan.

4. I then tell the new CC company to transfer the balance of the old CC to them, to avail of the 0% interest rate for 6 months, thus avoiding interest charges on the cash/EFT withdrawl.

5. I then have 6 months to pay off the outstanding CC debt.

Or am I missing something here...!! 

Thanks again.


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## RichInSpirit (21 Sep 2015)

Hi Warren. The only issue I can see with your proposed solution is that your repayments will be rather high for the 6 months. €242 per week.


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## warrendublin (21 Sep 2015)

RichInSpirit said:


> Hi Warren. The only issue I can see with your proposed solution is that your repayments will be rather high for the 6 months. €242 per week.


Yes, that's true, Rich, but at least the money i'm repaying is paying off principal debt, rather than a large wedge of it going to interest payments. (0% approx)

As things currently stand, I'd have a debt of 6,000 approx (there's 300.00 going into my CC in the next couple of days)
to repay. At 0% for 6 months, i'd hope to wipe it out, or almost eradicate it.


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## warrendublin (30 Sep 2015)

Just to update

1. Withdrew the cash from Credit Card A
2. Arranged a balance transfer of the money from CC A to CC B at an agreed rate of 0% for 6 months.
3. the balance transfer "eventually" went through (although CC Company A kept my debt on their books for 3 working days AFTER CC company B had taken the balance transfer and put it on my account at a rate of 0% - not sure why they were allowed do this, but they said it was working it's way through the system....yeah right!!)

4. I went up the CU and paid of the loan using the cash and my shares - leaving 50 Euro in shares to keep the account open.

5. I now have 6 months to pay off CC B at 0% on balance transfer amount (3,500)

6. I will be paying off the money I was paying to the CU, (500pm) into the CC account, and all of it will be reducing the principal amount rather than part of it going on interest.

I'm not sure how much interest i've saved but i'm guessing it's in the region of 1,500 (19,000 at 7% I think with 500pm repayments)

Finally, I want to thank everyone for their opinions and for "stress testing" the idea before I went ahead with it. Your knoweldge and advice was hugely appreciated.


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