# I have the cash, should I pay off a CU loan?



## o'dowda (17 Jul 2012)

I am intersted in this, i have a loan of 20.000 from a credit, i can pay this off at the moment and still have cash for a rainy day, my question is can i get a better interst rate from a deposit, or would it be better to pay it off.


----------



## Slim (19 Jul 2012)

o'dowda said:


> I am intersted in this, i have a loan of 20.000 from a credit, i can pay this off at the moment and still have cash for a rainy day, my question is can i get a better interst rate from a deposit, or would it be better to pay it off.


 
Hi O'Dowda, welcome to AAM,

It depends on what interest rate you are paying on the credit union loan. If you are paying less than 4%, and I very much doubt it, you might get an equivalent rate from a deposit. You could check the best buys section here on the forum on deposits.

Overall, probably best to reduce your loan.


----------



## o'dowda (20 Jul 2012)

Thanks Slim. Yes your right, i think it's better to clear the loan, nowhere gives over 9% the C/U charges and then i can take the money I'm currently paying for the loan
and put it somewhere i can get some interest.


----------



## Brendan Burgess (20 Jul 2012)

Absolutely best to clear the loan with a CU.

They usually have very high interest rates.

And there is the additional risk to your money, whereever they are on deposit. 

Brendan


----------



## Crugers (24 Jul 2012)

Brendan Burgess said:


> Absolutely best to clear the loan with a CU.


Best advice for OP is to put payment off loan rather than into shares.



Brendan Burgess said:


> They usually have very high interest rates.


Hmmm! Bit of a large paintbrush you are wielding there Brendan... Your own CU has rates from 5.9% to 9.4%. Yes they are high compared to mortgage (with the exception of pTSB) and interbank rates but surely not when compared to current personal loans from banks?*
Some* CU's charge the allowed maximum 1%pm.*
Some* CU's charge less than half the maximum permitted...



Brendan Burgess said:


> And there is the additional risk to your money, whereever they are on deposit.


Can I assume you are referring to the chances that the CU might have invested in some exotic and/or risky financial products?
In the past - yes - some with spectacularly bad consequences for Members funds. In support of them - it is not like they were alone in picking the 'also ran' from the list of runners!
Now - I would expect not as the Regulator awoken from his comfy coma and gets quarterly reports on how much, where and for how long the Members funds are invested.


----------



## Brendan Burgess (24 Jul 2012)

Hi Crugers

This guy has a €20,000 loan at 9% which means he is paying €1,800 per year in interest.

We have no idea where he has the money on deposit. It might be or might not be in a credit union. It's probably not because surely, if they were to act in his best interests,  they would have advised him to pay off the loan. 

So let's say it's in AIB. If AIB and the government goes bust, he will end up owing €20,000 to his credit union and will have no assets.

If he pays off his loan, and AIB goes bust, he will not lose anything. 

I do not expect AIB and/or the government to go bust, but I would not take the risk. 

Brendan


----------



## Crugers (24 Jul 2012)

Brendan Burgess said:


> ...We have no idea where he has the money on deposit...


Apologies - I mistakenly extrapolated that the deposit was in the CU...




Brendan Burgess said:


> ...I do not expect AIB and/or the government to go bust...


I think you will find that they both currently are!


----------

