Borrowing My Own Money From CU

[Gordon Gekko]

They’ve changed fundamentally. The Central Bank seem to have greater oversight and they’re undertaking more stringent credit checks on their members. So it makes no sense for them to charge 10% on a loan, as my credit union does.

As for “borrowing one’s own money”, I do it all the time on the basis that we’ve an emergency fund in the credit union but occasionally borrow money.

 

[NoRegretsCoyote]

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

If it's a myth, then why have two posters claimed that CUs have demanded recently that they leave their deposits in place in order to borrow?

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

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%).

If this is any way widespread then it's propping up credit unions' loans-to-assets ratio which is already very low at just 26%.

 

[24601]

If it's a myth, then why have two posters claimed that CUs have demanded recently that they leave their deposits in place in order to borrow?

It's a myth that this is widespread and all we have here is two anecdotes. There are some backward credit unions that still operate in this manner but they are the exceptions to the rule. Those credit unions should definitely be avoided in my view, although this is complicated by the reality that the banks do not lend to a lot of people that credit unions do. If these people can't get loans from their credit union they will likely end up going to moneylenders.

This should really be seen as a consumer protection issue in the credit unions that insist upon large amounts of savings as collateral as a matter of course. It would be useful if all credit unions published their policies in relation to this to ensure full transparency. The ones that do publish information on it are usually doing it to highlight that they do not implement such practices.

 

[Leper]

24601 has made some good points. Back in the day when the two CU's with which I was involved in their early stages of getting off the ground, we begged members to buy more shares in order to meet the demand of loan applications. We asked that family members of our membership would take out Share Accounts. We wanted our clients to leave the loans go full distance and not to repay early. Also, we begged people receiving loans to maintain their shares and add where possible. Like I said earlier, we hadn't a clue in such practice. Simply, we couldn't match the amount of loans with the demand.

I could write reams about the huge amount of people depending on illegal and legal money lenders then. To say the least it was frightening and I'm not going to post the details as some on here would see it as mere "propaganda." However, I will say I received many threats from illegal money lenders including one as I exited church one Sunday morning from who I regarded as Cork's greatest hypocrite. Illegal moneylending was such a problem back in the 1970's that we formed a cute plan for our CU members in repaying illegal money lenders simultaneously, ensuring no more illegal loans were accepted or sometimes even offered.

CU's do not have cheap interest rates, but interest is added only to the amount unpaid on the Principle, so interest reduces as you pay. I say this as many are not aware of such practice.

 

[NoRegretsCoyote]

Simply, we couldn't match the amount of loans with the demand.

That was then, this is now!

Only a quarter of credit unions' assets are in the form of loans to members now. They are swimming in deposits that they can't lend out.

 

[eirman]

CU's do not have cheap interest rates, but interest is added only to the amount unpaid on the Principle, so interest reduces as you pay. I say this as many are not aware of such practice.

Are saying that banks charge full interest on the original sum borrowed
until the last repayment is made? What about APR?

EDIT:
Leper, I did some online comparison of the total interest paid with CU vs Bank loans.
Banks are exactly the same as CUs. Interest reduces as you pay off the Principle, so credit unions do nothing special.
To imply otherwise, is to propagate false CU propaganda.

 

[Leper]

Apologies Eirman, if I steered you in the wrong direction.

 

[Paul O Mahoney]

Apologies Eirman, if I steered you in the wrong direction.

Well done Leper for all your work in Cork it really made life a little bit easier, I got my first bike from Barbers because one of the CUs in Cork that you and countless others gave their time to create something that helped so many people and families.

Unfortunately the ethos in them and in society in general has changed and the promotion of thrift and saving doesn't matter nor that community finance was for the community.

In 10 years our CUs will go down the was the S&Ls in the US went in the late 80s.

 

[Brendan Burgess]

Apologies Eirman, if I steered you in the wrong direction.

Not your fault Leper. It's part of the CU propaganda. They stress this and imply that the other lenders do something different. Many of you are fooled by it.

Brendan

 

[Monbretia]

Yes but while a straight forward bank loan does calculate on a decreasing balance Hire Purchase agreements don't so the comparison in interest calculation between a CU car loan and a HP agreement is valid, not forgetting that most people who can get a car loan from a bank will do so. CU & HP would most definitely be the next rung down for those maybe not able to get bank loan. Don't know how the PCP works these days.

It's not that long ago that all enquiries for car loans in banks would be referred on to their other entity that dealt with the like Bank of Ireland Finance/Lombard for Ulster are two that come to mind, I think at the time their loans were front loaded too.

 

[Paul O Mahoney]

Not your fault Leper. It's part of the CU propaganda. They stress this and imply that the other lenders do something different. Many of you are fooled by it.

Brendan

Really Brendan " propaganda" or marketing? I doubt thousands of volunteers in the CU movement are propagandists.

Bit harsh using that description.

Well if interest is now calculated the same way it certainly wasn't the CUs that changed.
And to echo others you are not paying interest on your own money, you are paying interest on the loan that was taken out. This is exactly the same if you had savings in a bank and took out a loan .

I'm surprised that people think the most important thing to compare is simply interest on loans while ignoring that CUs don't borrow billions in cheap money from a failed global financial system and didn't wreck the economy or have the government as major shareholders multiple times.

Yes the movement still needs improvement but to say they are employing propaganda is disrespectful.

 

[Gordon Gekko]

Ah come on Paul, I’m a credit union customer, but their messaging is propaganda. All that for the community nonsense and in reality they’re charging people 10% interest but now applying normal banking criteria.

 

[Brendan Burgess]

This is exactly the same if you had savings in a bank and took out a loan .

Absolutely, you would be equally stupid to do that with a bank as you are with a Credit Union. The only difference is that banks do not insist that you keep your savings with them in order to take out a loan.

Some Credit Unions do.

Brendan

 

[Brendan Burgess]

CUs don't borrow billions in cheap money from a failed global financial system and didn't wreck the economy or have the government as major shareholders multiple times.

More CU propaganda I am afraid.

We did not bail out the banks.

We bailed out their depositors. If we had not done so, most of the credit unions would have gone bust.

So it's more correct to say "We bailed out the Credit Unions" than "We bailed out the banks."

Brendan

 

[Brendan Burgess]

"propaganda" or "marketing"?

When it comes from a group imbued by an arrogant belief that they are always right and everyone else is always wrong and that everyone else is responsible for their failure to lend money, I think it's propaganda and not marketing.

Brendan

 

[Paul O Mahoney]

Ah come on Paul, I’m a credit union customer, but their messaging is propaganda. All that for the community nonsense and in reality they’re charging people 10% interest but now applying normal banking criteria.

Is "propaganda" the correct word though? CUs are cooperatives and probably the greatest, in my view, financial movement this country has ever seen.

I'll fully admit they have issues and perhaps 20 years ago they should have been a bit more strategic in fitting their financial products into the mainstream and using the leverage they had to become a better finance option for people.

 

[Paul O Mahoney]

"propaganda" or "marketing"?

When it comes from a group imbued by an arrogant belief that they are always right and everyone else is always wrong and that everyone else is responsible for their failure to lend money, I think it's propaganda and not marketing.

Brendan

Ok

 

[Leper]

I think I'll bow out of this thread.

 

[Brendan Burgess]

CUs are cooperatives and probably the greatest, in my view, financial movement this country has ever seen.

Hi Paul

I would love to see Credit Unions reform themselves and become about customers rather than being about the boards who run them. I would love to see them developing a policy of treating customers fairly rather than being wedded to ideas developed 100 years ago.

I am a great believer in mutuals.

But good people get nowhere in the movement. They are treated as heretics and give up in despair. So the same people populate the boards and like nothing better than heading off to conferences around the world.

It is a terrible pity.

For example, I would love to see them shifting their excess cash into a Building Society and really bring in competition to the mortgage market. But no, each credit union wants to give out mortgages themselves although they have no experience and are not big enough to do so.

Brendan

 

[24601]

All that for the community nonsense and in reality they’re charging people 10% interest but now applying normal banking criteria.

They're definitely not applying "normal banking criteria" - credit unions are far more forgiving than the banks are and would, by and large, have a more flexible approach to underwriting. They also have to generate a surplus to keep the lights on, and are very limited in what they can do in the current environment without handing back most of the savings they have to members and filleting their branch network. When they do these things they are accused of being just like the banks. It's a lose-lose for them.