# Put Lump Sum into Credit Union Shares to Top Up Loan



## kellyr4 (3 Oct 2007)

My current CU balance is as follows:

Shares :€3053
Loan:    €6572

I want to top up my loan for home inprovement expenses by €4000.

If i put a lump sum of € 500 in to my shares it will increase my share balance to € 3553.

Using the 3:1 ratio rule, then I would be eligible to borrow a max of         € 4087.

Can I do this or are there rules against it?

My loan repayments and share contributions are debited straight from my wages every fortnight.

I have always paid off my CU loans in the past and have never fallen into arrears with them.


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## Guest120 (3 Oct 2007)

Plenty of CUs will give you loans without any savings/shares, it's all down to the individual committees.

Talk to them.


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## kellyr4 (3 Oct 2007)

I understand that each CU has its own rules but is there a general rule.

I am worried that what i want to do will be seen as cheeky or sly ie. by putting the 500 into by shares I am increasing my borrowing power by 1500 as opposed to paying 500 off my loan which is only increasing my borrowing power by 500.


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## oldtimer (3 Oct 2007)

You can be quite sure you will not be seen as cheeky or sly by putting the 500 into the shares. If you are paying off the existing loan regularly you will have no problem. The CU should be delighted to increase your loan - they are in the business of granting such loans. So much so most CUs are ignoring the 3 to 1 ratio. They do well out of customers like you - what interest are you getting on your shares, somewhere between 2%- 3%? And you will be paying a loan for house improvements, I would say between 6%-7%? So you can see it is profitable for them to increase your loan.


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## Brendan Burgess (3 Oct 2007)

Shares :€3053
 Loan:    €6572
Net borrowings:  €3,500 

You are paying interest of probably 9% or €590
You are receiving deposit interest of around €60

So you are paying €530 on a net loan of €3500 or a whopping 15%

Borrow €3500 from NIB or Bank of Ireland or even your credit card and pay off the Credit Union loan and withdraw your shares. 

Then borrow the €4000 you need from the cheapest lender, which is unlikely to be the credit union. 

Brendan


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## kellyr4 (4 Oct 2007)

Thanks for your views. I feel more confident about applying for the top up now


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## oldtimer (4 Oct 2007)

Kelly4 - are you still applying for the top up? Brendan is giving you excellent advice, are you ignoring it? As I said, Credit Unions are delighted to have customers like you. Well, its your money so best of luck. Make sure they give you the 'home improvement' rate of interest which should be less than 9%, probably around 7-7.5%.


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## kellyr4 (4 Oct 2007)

I appreciate the advice but im  still going for the credit union loan topup. 
I have a large outstanding loan with one of the main banks and I dont think another bank would approve a loan for me............even though I earn enough to make all of the payments.

I like the flexibility of the credit union. They gave me my current loan over the counter without doing any credit checks. I have a property for sale at the moment and plan to clear all debts when it sells. The credit union do not have any penalties for the early repayment of a loan. 

I put € 500 into my shares yesterday.
I went over today and paid € 50 off the loan. Normal repayments come out of my wages every fortnight both into the loan and into my shares. 

I am going to go back tomorrow and apply for the top up loan of € 4000. 

So current balances are as follows:

Shares :3553
Loan : 6530

3553 x 3 = 10659 - 6530 = 4129

Therefore, I hope they allow me to top up the loan by € 4000

Any views welcome.


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## megabyte (4 Oct 2007)

I think sometimes one of  the main points of the C.U. is missed.
The fact that you can clear your loan early with no penalties is great and also that extra payments over your normal weekly or monthly payments brings down your loan quicker and in turn means that the interest you pay is much lower that the 7 or 9% mentioned.
Usually the banks will not allow Extra payments on a  personal loan and you are tied into a fixed amount of years.


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## Brendan Burgess (4 Oct 2007)

Hi Megabyte

I don't think that is true. I think that most personal loans can be repaid early without penalty and repayments can be increased. 

You can't do it for fixed rate loans or for hire purchase, but you can for an ordinary bank loan. 

The Credit Unions make claims which imply things about other loans which are not true. If a Credit Union requires you to hold shares of one third the value of the loan, then it is much more expensive to borrow from than the banks.

brendan


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