# Credit union loan vs share withdrawal scenario



## scarednow (24 Aug 2011)

Hi

Currently have CU loan with balance ~10500 and shares of ~2900. I applied for a top up of 500 euro for expenses relating to the upcoming school year, and my application was rejected. I then enquired about withdrawing shares and was told that I must have at least 25% of my loan balance in shares, which is fine. My question is, the credit union is in the business of making money by getting interest on deposits / loan repayments each month. I was told the most I can withdraw is 275 euro.

My repayments are made by standing order each month, are above the signed agreed repayment rate and I simply can't understand why the credit union would advise me to take out 275 shares rather than give me a loan for 500 which they may make say 550 euro back on?

I'm at a loss but to me this whole responsible lending has gone crazy looking at these figures - maybe i'm missing something!


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## Slim (24 Aug 2011)

Although you are not in arrears, there is a lot of information on this thread about the ratio of loans to shares and the reluctance of CUs to allow the share balance to fall below 25%....http://www.askaboutmoney.com/showthread.php?t=155464

S


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## Pinchy (25 Aug 2011)

Hi Scarednow,

I would recommend writting a frendly well constructed letter to the 'credit committee' outlining:

- How long you have been a member
- The fact that you have been overpaying the loan as per your credit agreement (say for  
  long) 
- Ask to meet with them should they have any concerns about the top up.
- Remibd them that they should be acting within the interest of the members. 

Rightly pont out that they will make further profit from the top-up. 

Some times it requires a gentle escalation of the issue in order to get things moving. 

Best of luck


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## niceoneted (25 Aug 2011)

Is your loan constructed of one financial purchase or is it a series of top up loans after another. Is it is the latter that may be another reason as to why it was rejected as they may see it as the loan will never be fully repaid - or it will be a long time before it is.(not sure I'm using the right words there to explain it)


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## ClubMan (13 Sep 2011)

One possible approach as per the thread that _Slim _referenced ... maybe ask them to 


offset your €2.9K in shares (less whatever amount you need to retain in shares to remain eligible for members' loan insurance etc.) against the outstanding loan balance of €10.5K leaving €7.6K outstanding
retain the original repayment schedule (number of monthly or other repayments) but
reduce the ongoing repayments to reflect the reduced loan balance and this (maybe coupled with the withdrawal of €275 that they are allowing you to make?) may yield the €500 that you need for school expenses?


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