# Should I get a Credit Union loan to pay off my Credit Card?



## folder (31 Jan 2013)

I have a credit card with about €9,000 on it. 

We started this year putting €200 each week towards it but my question is should we continue to incur the daily interest rates or get a credit union loan?

I have no idea how to calculate how much it is costing me per day(in relation to added interest) but I'm wondering would a credit union loan be a better option with it's pre loaded interest?


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## Dermot (31 Jan 2013)

Please give a lot more detail on your income/job situation ie permanent or otherwise?. Have you a house/mortgage, if so how much?. Have your other loans?. What rate of Interest is your Cr Card debt?. Have you asked Cr Union for a loan?. What rate are they charging?.


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## wbbs (31 Jan 2013)

Hard to imagine any circumstance where a credit union loan would be dearer than a normal credit card debt.  Find out the rate on your credit card and the rate from the credit union.


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## folder (31 Jan 2013)

wbbs said:


> Hard to imagine any circumstance where a credit union loan would be dearer than a normal credit card debt.  Find out the rate on your credit card and the rate from the credit union.



5% Secured. I have savings in there for a wedding so secured against that. It's MBNA so at present it's 19%

Yes I can see there is a 14% difference but the Credit Union is upfront so I can always know the payment but MBNA is applied daily so the amount owed changes daily and will go down as I make each €200 payment.

So is it worthwhile taking a secured credit union loan today to clear it down?


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## Dermot (31 Jan 2013)

Clear Cr Card off immediately and try and stop using it as much as before and try and clear off all future bills on Cr card prior to Interest going on it. Try and pay off your Cr Union loan as quickly as possible and start saving. Best of Luck to you


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## Brendan Burgess (31 Jan 2013)

wbbs said:


> Hard to imagine any circumstance where a credit union loan would be dearer than a normal credit card debt.  Find out the rate on your credit card and the rate from the credit union.





Dermot said:


> Clear Cr Card off immediately and try and stop using it as much as before and try and clear off all future bills on Cr card prior to Interest going on it.



Let's look at the numbers in detail. 



> 5% Secured.


This means that she has more on deposit with the credit union than what she has borrowed. 

We don't know how much this is but let's assume the following figures 



|Total|Credit Union| Credit card
Loan|€14,000|€5,000|€9,000
Interest rate||5%|19%
Interest|€1,960|€250|€1,710
Deposit|€5,000|€5,000|0
Deposit interest||€50
Net borrowings|€9,000|0|€9,000
You are borrowing at 19% on your credit card because you have been fooled by the Credit Union Myth that it's good to have savings, even if they are paying only 1%.  So your Credit Union savings are costing you €950 per annum. 

Take your shares out of the Credit Union.  Unfortunately, due to the stupid Credit Union legislation, you  have to leave 25% of the amount of the loan in shares. Take out the balance and pay it off your credit card. 

Here are the actual rules - don't take any rubbish from the CU staff. 

1) You can immediately withdraw any cash in excess of the loan amount - do this immediately . 
2) Stop saving 
3) The board has to apply to allow you withdraw in cash any amount in excess of 25% of the loan. Apply immediately and if they don't agree, put down a motion at the AGM. Kick up about this. Don't forget. Your CU savings are costing you 18% interest. 
4) When you have achieved the above, ask them to set the shares against your loan They will probably refuse to do this. 

If you are in a progressive CU which cares about its members and has moved on from the 18th century, they should allow you go all the way to no 4)


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## Brendan Burgess (31 Jan 2013)

The overall point here is that you have been conned by the Credit Union Myth



> I have savings in there for a wedding so secured against that.


You have no savings if you have a CC balance of €9,000 on which you are paying 18% interest.  Get rid of your CC balance and if necessary, pay for your wedding with your credit card.

It sounds to me as if you have been running up a CC bill because you have committed yourself to saving with the CU.


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## vandriver (31 Jan 2013)

As I read the OP,no money is currently borrowed from the CU,but because of savings in excess of €9k,the CU will grant a loan secured on the savings at 5 % interest.
The OP appears to be under the misapprehension that credit unions preload interest,which in my experience is not the case.
Finally,if I have got the right end of the stick,I would take out the credit union loan and pay it down at the 200 a week,and you will be paid off in 46 weeks,saving approximately 700 euro in the process.


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## Brendan Burgess (31 Jan 2013)

Hi vandriver



> 5% Secured


I took this to mean that she had a loan at 5%, but your interpetation makes much more sense. She is thinking of taking out a "secured loan" to pay off the Credit Card. 

folder, if vandriver is correct, you have been borrowing on your credit card at 19% to build up credit union savings which are probably paying you 1%.

The solution is very simple. Take out all your savings and pay off the Credit Card as quickly as possible. 

When you have the credit card paid off, then you can start saving again with the credit union.  It is astonishing that the CU did not give you this advice.


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## Brendan Burgess (1 Feb 2013)

Hi folder

The original title of your thread was "Pay off Credit Card or Get Credit Union Loan"

I have edited it to better reflect your question. Is that ok?

Brendan


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