# Pay off loan early with shares to help tackle credit card debt?



## lucy09 (27 Dec 2012)

I currently have €3000 shares in the  credit union and my loan with credit union is now just gone under €3000. I am currently paying back €540 p/m to the loan. 

My problem is that I have credit card debt of €7000.I am wondering should I put my credit union shares of the loan and use the 540 p/month to put off the credit card starting now or would I be better to wait until I have the credit union loan paid off during the summer and ask the credit union for a 7k loan to pay the credit card and leave my shares intact. The credit card interest is crippling me as Im only paying the minimum and getting nowhere. Want to sort out my credit card debt once and for all in 2013. Any advice appreciated.


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## LDhood (27 Dec 2012)

In my response, I am assuming your credit card interest is higher than the interest on your credit union loan.

If I were you I would approach the credit union to "top up" the loan with them and see if they will extend it by 7k to allow you to pay off the credit card.  If not, see if they can meet in the middle somewhere so that you can get some money to pay towards the cc.

If they won't do this, I would ask about restructuring the repayments of the 3k loan with them so you pay, say 150 a month and the other 400 towards the cc.

Good luck.


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## alexandra123 (27 Dec 2012)

If you want to get out of debt, I think you should use the shares in the Credit Union to clear your loan. Then use the 540 per month to pay off the credit card. When the credit card is finished then start saving in the credit union again.

I don't see the point in getting a top up loan - when all you are doing is putting yourself into more debt and leaving yourself with no way to access your savings. So really their is no point in having the savings their if you cant touch them. 

I was under the impression that credit unions are charging 10% interest on loans, so they are not by all means a cheap source of money.


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## Brendan Burgess (27 Dec 2012)

Hi Lucy

You have to tell us the interest rates. 

You have to then just crunch the numbers. 

Brendan


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## LDhood (28 Dec 2012)

alexandra123 said:


> If you want to get out of debt, I think you should use the shares in the Credit Union to clear your loan. Then use the 540 per month to pay off the credit card. When the credit card is finished then start saving in the credit union again.
> 
> I don't see the point in getting a top up loan - when all you are doing is putting yourself into more debt and leaving yourself with no way to access your savings. So really their is no point in having the savings their if you cant touch them.


 
If the interest rate is lower in the credit union then you will most certainly pay less over a period of time by consolidating your loans into one single loan with the credit union.  If you drag out paying the credit card month to month, interest will continue to accrue at the higher rate.  

A top up loan is not getting the OP into more debt, it is _moving _the outstanding loan from the credit card to the credit union.  

She won't have a penny in savings if she uses all of it to pay off the credit union loan and henceforth, no chance for future borrowings (if needed) from the credit union until she builds up a balance of shares.

This is all moot until we know the rates.


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## lucy09 (28 Dec 2012)

Hi,
Thanks for the replies. My credit union loan is 6.750 APR and my MBNA credit card is 14.9 APR.
I had re-structured my credit union loan two years ago but I have since increased the amount and am paying back more than was originally agreed. I had asked credit union for another loan but they said that until I had paid off the re-structured loan that I would not be eligible for another loan.


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## Brendan Burgess (28 Dec 2012)

Hi Lucy

You have €3,000 in shares in a credit union on which you are probably earning 1% interest, or €30 a year. 

Although, the CU won't give you a loan, they may allow you to withdraw up to €2,250 (75%) of this while retaining the €3,000 loan.

You should pay this off your credit card. 

Your net savings will be €312 per year. (2,250 @14.9% -1%) 

You should pay the minimum allowed off the credit union loan. 

You should pay as much as possible off the Credit Card loan.

If the CU don't allow you to withdraw €2, 250, you should kick up a fuss and write to the board and attend and speak at the AGM as it's not acting in your best interests.  See this Key Post for advice on how to go about it.

If you have no success, then you should use your shares to pay off your CU account saving yourself  €172.50  ( €3,000 @6.75% -1%)


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