Borrowing My Own Money From CU

E

eirman

Registered User
Messages
121
If I have 5K saved and I want to buy a 15K car, I have 2 options .....

1 > Borrow 10K from the bank and use my 5K savings.
2 > Borrow 15K from the CU (effectively paying interest on my own savings).

With very similar interest rates, option 2 makes absolutely no financial sense at all.
So .... why borrow from a CU, if borrowing from a bank is an option?
 
Except that you could just do option 1 with the credit union too so your post makes no sense.
 
24601 said:
Except that you could just do option 1 with the credit union too so your post makes no sense.
Click to expand...

Unlikely. Most Credit Unions require people to keep 25% of their borrowings in shares.

eirman's post indicates how stupid this is.

eirman - Option 1 is the best.

You could reduce your credit union shares to €100 and then apply again for a car loan for the €15k.
They would probably give it to you as they are desperate to lend money.

But if the bank's rate is lower, go with the bank.

Brendan
 
Brendan Burgess said:
Unlikely. Most Credit Unions require people to keep 25% of their borrowings in shares.
Click to expand...

This is a myth, the vast majority of credit unions have moved away from this practice.

Edit: @Brendan Burgess you might be confusing the "savings-secured" loan offered by many credit unions (and PTSB), which is an entirely different thing, and is mental.
 
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Paying interest on your own money is madness.it happens a lot that people think the credit unions are helping the customer.they are only helping themselves
 
24601 said:
This is a myth, the vast majority of credit unions have moved away from this practice.
Click to expand...

If they have, I am delighted to hear it.

I have been saying it for years.

It's a couple of years since I spoke to a Credit Union manager and at the time, he said that most credit unions had plenty of loans backed by shares. I think it was as high as 33%.

I am glad that this has fallen close to zero.

Brendan
 
Credit Unions have long outgrown of why they were founded. In the days before Credit Unions many people could not get loans from anywhere except from illegal moneylenders where appallingly high interest rates were charged and dreadful outcomes for somebody who defaulted on such loans. This was one reason why I got involved in the founding of two Credit Unions. Back in the 1970's the Credit Union Movement was expanded in the UK especially amongst the non white community.

Get one thing straight:- Nobody in Credit Unions is borrowing his/her own money. Yes, his/her own money (savings/shares) is being used as indications of how much one can save and a little wall against defaulting. Never forget the Credit Unions kept many a family from penury.

OK! they've got very big and flashy - but they gave loans to many whom the banks treated as financial lepers. Banks became big and flashy too, too big and too flashy.

Quotable Quote from Leper:- If you have designs on where you're heading, never forget from where you came. Keep supporting your local Credit Union.
 
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Leper said:
Get one thing straight:- Nobody in Credit Unions is borrowing his/her own money.
Click to expand...

Leper

While I am sure that the two credit unions you founded were customer friendly, the vast majority are not or were not.

They give what they call "secured loans".

People have €20k in shares and they need €15k, and they go off and take out a loan for €15k instead of withdrawing €15k.

Up until very recently, most credit unions required someone with say €5k who wanted to buy something for €20k to borrow the €20k.

So these people are borrowing their own money.

Brendan
 
Brendan Burgess said:
Leper

While I am sure that the two credit unions you founded were customer friendly, the vast majority are not or were not.

They give what they call "secured loans".

People have €20k in shares and they need €15k, and they go off and take out a loan for €15k instead of withdrawing €15k.

Up until very recently, most credit unions required someone with say €5k who wanted to buy something for €20k to borrow the €20k.

So these people are borrowing their own money.

Brendan
Click to expand...
Brendan, Here we go again. Semantics are just that - Semantics. Nobody is borrowing their own money in Credit Unions. The amount on deposit acts against defaulting and Credit Unions were founded not to give out loans that would not be repaid. Whatever Credit Unions are, they are not charities. They are "small businesses" that must put back any profit into the "business." Many people work on a voluntary basis for Credit Unions; even I used to.

Please note I never founded any Credit Union; I was merely involved in the setting up of two Credit Unions in different cities. Both are still in existence although on a much larger scale.

Can I bring you back to the 1960's and 1970's where many people took out loans through illegal money lenders who charged exorbitant interest rates plus add-ons for extending loans etc? These scum lenders even commandeered the Childrens' Allowance books of their victims. On the 1st Tuesday of the month they'd stand outside post-offices hand the CA book to the victim who received due money from the Post Office and paid the next instalment of their debt to the illegal money lender who immediately took possession of the Childrens' Allowance book again.

It was the Credit Union movement that single handed put an end to this appalling practice. This was one of the main reasons as a voluntary young trade union activist I got involved in first setting up a Credit Union. This is only one story of many I could tell.

Now for my semantics - Remember the banks would not give a loan to anybody unless the person proved he didn't need the loan - strange but true. Many people were depending on illegal money lenders. My blood boils every time I think of their dreadful practices and were held in some kind of decent esteem because their victims couldn't borrow money elsewhere.
 
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OK Leper

Park the Credit Union propaganda for the moment to focus on the question asked by the OP.

I have €10,000 in cash sitting on the kitchen table.
I want to buy a car for €10,000.
I go out and give the seller €10,000 and drive away in my new car.

You have €10,000 cash.
You go into ptsb and put it into an account which pays you no interest and which you cannot withdraw it from.
They lend you the €10,000 to buy the car and charge you €700 a year interest.

Are you borrowing your own money or is that just "semantics"?

"Semantics" will make you a very poor person.

Brendan
 
The following might be irrelevant to this thread but just on some points of information I'll say the following:-
1. Back in 1970, I returned from working in the UK (where CU's prospered especially amongst the Irish and non white communities) and as a young unpaid trade union rep saw the need and the viability of a Credit Union for my fellow low grade public servants. In a nutshell we couldn't get credit from the banks. I was still in my teens and some of the people with which I was working shared my thoughts and a committee was set up to explore the forming of a Credit Union. Let me be first to say:- We hadn't a clue and found the battleground of low finance to be daunting. Even words like "debit" caused confusion to us (I bet you think I'm joking, but I'm not). Somehow our Credit Union got off the ground. Problems where there to be solved and somehow we resolved them. Some bank workers helped too and even they recognised their internal jargon "It might not be in the interest of the bank to offer loans" to the like of us.

2. Legal Money Lenders:- (I'm not mentioning the banks as they wouldn't give us credit anyway). Most were local business people who saw the need to lend money and the high profits to be made in the process. They charged high interest rates and had people working for them. What they did was marginally above the line but at least they gave loans to people the banks wouldn't touch. Some of the Legal Money Lenders ran shops (usually furniture shops) and sold items people needed and gave loans to people if they bought items in the shops. Hence more profit again - but good business sense from their point-of-view.

3. Illegal Money Lenders:- I was surprised at some. They were housewives, electricians, public-servants, bus-conductors etc. Usually, they operated alone and gave relatively small loans to people who hadn't the acumen not to get involved. These victims couldn't get credit anywhere else. Childrens' Allowance books were illegally possessed as a means of Credit Management. Many collection methods included strong-arm stuff at worst and less strong-arm sitting in a car outside of the victim's house continuously and loudly blowing the horn until somebody came out and agreed to another method of paying (usually at a higher cost). From interviews I have given to university students of finance they were unaware of such practices.

Ireland had just become a member of the EEC; things were different and needed change. Irrespective of the modern banks Backing Brave and Drop-in-for-a-Chat-we-can't-be-shocked etc the banks had no interest* in low earning people.

*Pun intended
 
Brendan Burgess said:
OK Leper

Park the Credit Union propaganda for the moment to focus on the question asked by the OP.

I have €10,000 in cash sitting on the kitchen table.
I want to buy a car for €10,000.
I go out and give the seller €10,000 and drive away in my new car.

You have €10,000 cash.
You go into ptsb and put it into an account which pays you no interest and which you cannot withdraw it from.
They lend you the €10,000 to buy the car and charge you €700 a year interest.

Are you borrowing your own money or is that just "semantics"?

"Semantics" will make you a very poor person.

Brendan
Click to expand...

Thanks Brendan for suggesting what I should do and again I see your semantics still obtain ("propaganda" etc) and that's OK, you own the forum and can take your ball home at any time.

Yes, what you say makes some sense and is relative to people who have access to earning good money. If you have easy access why borrow? It makes good business sense not to borrow. (You see, we agree on some points).

You're a low earner and life suggests you will need more loans in the future. You don't have the "reddies" in the biscuit tin under your bed. You need to foster good business sense with people who will give you those loans. Credit Unions can fill that need. Whatever way you look at it, you need to keep some money with them. Like I said in a previous post there is a need to show you can save something as Credit Unions are not charities.

Once again I respectfully say you are not borrowing your own money; that's there for your future use.

"Semantics" - Yes, I'm not rich, but I plough on and hope when the Judgement Day comes my performance will receive a favourable outcome. I hope I'm seen as the Leper who gave thanks.
 
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I had one of my brain waves a few weeks ago, I thought I would spend some money on the house and garden, I joined the CU a couple of years ago and have about 8k with them, I called them up, never having borrowed from them before to ask what’s the procedure in taking out a small loan, about €15k would do, so I really only needed 7k.
Told them what it was for.
Not a problem, but I need to borrow the €15k and leave the 8k in the account, crazy, why would I do that when I only need 7k

The Op has a valid question.

Leper, your a great talker alright, and I like you posts, but your a bit like a politician on this, answering a completely different question.

Your answer is in reply to “is there a need for credit unions” But no one has asked that.
 
LS400 said:
I had one of my brain waves a few weeks ago, I thought I would spend some money on the house and garden, I joined the CU a couple of years ago and have about 8k with them, I called them up, never having borrowed from them before to ask what’s the procedure in taking out a small loan, about €15k would do, so I really only needed 7k.
Told them what it was for.
Not a problem, but I need to borrow the €15k and leave the 8k in the account, crazy, why would I do that when I only need 7k

The Op has a valid question.

Leper, your a great talker alright, and I like you posts, but your a bit like a politician on this, answering a completely different question.

Your answer is in reply to “is there a need for credit unions” But no one has asked that.
Click to expand...
Nice post LS400 and I can see what you are saying. Yes, I'm a good talker and the Burgessmeister is the kind of guy I'd enjoy entertaining on our terrace in Spain while looking at the Mediterranean waves lapping against the beach. You're borrowing €15K and have €8K in CU Shares. Great! A good place to be. If you never need another loan you'd be stupid not to use your CU Shares.

But, life is strange and you may need loans in the future. In that case you might be eventually better off to accept the €15K loan.

Do we need Credit Unions?:- If not - Let's close all of them pronto then! - I'm heading into my 70's, it won't affect me. Let's give all the lending powers exclusively to the banks; I'm sure they'll cover themselves in glory like they did in the early 2000's.

PS:- LS, you're welcome on our Spanish terrace too.
 
Hi Leper,
I totally accept everything you say regarding legal/illegal moneylenders and the benefits Credit Unions
provide to the general public (especially those who cannot access bank loans).

However, my question was quite specific and did mention that a loan from a bank at a similar interest rate was an available option.
I would pay about €700 extra in interest by borrowing 15K rather than 10K (Over 3 years @ 8.6%).


Credit unions need to ...
  • Reduce their lending rates (to say, nearer 5%)
  • Increase deposit interest rates (when the new attractive lending rate increases lending).
  • Greatly reduce the collateral share requirements when lending (so one doesn't need to borrow ones own money).
 
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Brendan Burgess said:
OK Leper

Park the Credit Union propaganda for the moment to focus on the question asked by the OP.

I have €10,000 in cash sitting on the kitchen table.
I want to buy a car for €10,000.
I go out and give the seller €10,000 and drive away in my new car.

You have €10,000 cash.
You go into ptsb and put it into an account which pays you no interest and which you cannot withdraw it from.
They lend you the €10,000 to buy the car and charge you €700 a year interest.

Are you borrowing your own money or is that just "semantics"?

"Semantics" will make you a very poor person.

Brendan
Click to expand...
Hold on, auto loan notes are carrying 6-7% interest rates in Ireland? Is this for the subprime market or a prime borrower? What rates are banks and credit unions paying to depositors? I ask because rates are historically low virtually everywhere and 6-7% is absurd in a world where one can borrow a million at 2-3%. I would expect depositors to get 2-3% on their bank deposits if 6-7% is what is charged on a small value loan.
 
Leper said:
Thanks Brendan for suggesting what I should do and again I see your semantics still obtain ("propaganda" etc) and that's OK, you own the forum and can take your ball home at any time.

Yes, what you say makes some sense and is relative to people who have access to earning good money. If you have easy access why borrow? It makes good business sense not to borrow. (You see, we agree on some points).

You're a low earner and life suggests you will need more loans in the future. You don't have the "reddies" in the biscuit tin under your bed. You need to foster good business sense with people who will give you those loans. Credit Unions can fill that need. Whatever way you look at it, you need to keep some money with them. Like I said in a previous post there is a need to show you can save something as Credit Unions are not charities.

Once again I respectfully say you are not borrowing your own money; that's there for your future use.

"Semantics" - Yes, I'm not rich, but I plough on and hope when the Judgement Day comes my performance will receive a favourable outcome. I hope I'm seen as the Leper who gave thanks.
Click to expand...


Myself and 12 of my family members are in our local credit union the best part of 20 years and save weekly with them.
In the last 12-24 months I approached them wanting too borrow €25,000.my father agreed too go guarantee for loan if need and I had about 6-8k with them.the loan went too the committee and they said no.

I've borrowed thousand off them over the years and never missed a payment and have even borrowed my own money as a loan within shares where I had more savings than I needed and still borrowed and paid interest on the loan,yet they still refused me a €25,000 loan,so in some cases they can't fulfill the needs of its members
 
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