Credit Union --- best for loans --- what a joke!

[Bank Manager]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

First things first - I'm a banker......

Working on the basis that the original figures quoted in this post are correct, if I were to quote repayments of E45 on a E2,000 loan over 12 months (based on 52 weekly payments), the rate I'd be quoting would be 32.91% (APR 37.2%). Not doubting you, but are you sure your figures are correct?

BM

 

[Guest127]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

dundalk credit union now advertise 6.95% as their loan rate. also they usually give a 'rebate' on the interest paid when they declare a divi. that said when I was shopping around for a €20,000 car +tidying up loan 4 years ago bank of ireland beat them out of site. I took out the €20,000 loan over 60 months fixed and I repay €394.25 per month. I refused to take out insurance etc. (I fixed because I had heard that interest rates were going up. something like hearing house prices will fall if you ask me.)
I only get yearly statements and the latest one dated 01/06/2005 states at the bottom - 23sept 2004 - LENDING RATE TO DATE 4.14%. and on 01/06/2005 I still owed €8543.09 after 35 of the 60 repayments.
I shopped around for this loan and they were the best at that time. happy enough.

 

[JoeB]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

Bank ManagerFirst things first - I'm a banker......

Working on the basis that the original figures quoted in this post are correct, if I were to quote repayments of E45 on a E2,000 loan over 12 months (based on 52 weekly payments), the rate I'd be quoting would be 32.91% (APR 37.2%). Not doubting you, but are you sure your figures are correct?

BM

Interest is max 17%, can you please explain how you derived your figures??


from Oasis.Gov.ie
Advertisements of credit must contain:
The Annual Percentage Rate (APR), which must be shown in a very prominent place. A definition of APR is "the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit given".


The guy pays E340 in interest on a E2,000 loan over one year...
total cost of credit = 340
amount of credit given = 2000
ergo APR = 17%

am I wrong?

Cheers
Joe

 

[Bank Manager]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

Joe - you are correct with your E340 interest charge and that represents 17% of E2,000 borrowed.... however you must factor in the fact that the E2,000 isn't borrowed for the full year (as both interest and capital are being paid off each week) - as a very rough rule of thumb, and this isn't an exact science, if customer borrows E2,000 over a year, the average balance on the loan for the year will be E1,000, then if you apply the E340 charge on the average balance you'll come up with an interest rate of 34%! After that (in my bank's case, we actually charge the interest quarterly) the APR will work out as I've quoted.

As I said in my initial post, while the Credit Union would be a competitor of mine, I'd doubt they are charging this rate of interest, but I could be wrong...........

BM

 

[extopia]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

Eh, would anyone here borrow from a CU?

I think we all know that CUs do not and in fact cannot compete with the banks. The traditional advantage of the Credit Union was that it was easier to get a loan from them as long as you were a saver. Remember not so long ago when the major banks didn't even deign to get into the mortgage market? They were only interested in lending to low risk customers.

Times have changed. The banks have relaxed their credit rules and everyone is climbing over everyone else to lend money to anyone who can breathe. In this market the CUs can't compete, except for the business of the few who still have difficulty in getting credit from the banks.

 

[vladamir]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

for what its worth, perhaps not much, but here we go:

when i was a wee lad!, not all too long ago -

the credit union gave me an unsecured loan (as a 17 year old) for a motorbike - what bank would do this?

perhaps the rates were high, i didn't care then - i paid them off in a few weeks - my experience of banks is that if you enter a 12/24 month loan contract you are stuck with it, save for paying penalty escape fees - the credit untion take whatever you give them - when i sold the bike i just cleared off the loan. i think (i know i'll be savaged for this) credit unions (certainly my one) has a friendly feel - they encourage you to come in and they look delighted to see you - my bank on the other hand....... i accept that you're not paying for friendliness - but on small term loans over a short period - i think the credit union are great.

also - last time i was in, they surveyed me as to whether i'd be of a mind to take out a mortgage with them, they must be thinking of expanding into this area?

also - correct me here - but, if you have a propensity for bad debts - i dont think the credit union can blacken your credit record? - i've always paid them off though, i think they give a great service.

would i be correct in saying that credit unions are predominant in working class areas? - where credit was generally unatainable and the 'ould' credit union was an alternative to the money lender? that said, my credit union is an dawson street!!

 

[dam099]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

The guy pays E340 in interest on a E2,000 loan over one year...
total cost of credit = 340
amount of credit given = 2000
ergo APR = 17%

am I wrong?

Cheers
Joe

Yes there are at least 3 posts above explaining why you are wrong.

 

[Observer]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

that said, my credit union is an dawson street!!

Funny, so is mine! And a great bunch they are too....... can't do enough for you.

 

[bskinti]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

As far as I know when you borrow from credit unions you pay interest on all money including your own money in shares and at the end of the year approx November you will returned on shares and interest paid during year and when one goes again the other the final interest is very little, Remember credit unions are supposed to be a non profit organization.

 

[Crugers]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

I suspect that the replies here are based on incomplete original information and therefore make computation of APR and interest impossible.
I suggest that the original stated repayment €45 x 52 weekly repayments contained principal, interest and a "saving" element.
However IF (note the big if)
the rate of interest charged by any credit union exceeds the maximum of 1% per month, and
the credit union knowingly charged or accepted the interest
then it could be that the Credit Union would be "...Best for loans...".
Why? Because...
The Credit Union Act, 1997 Section 38(2) states that:

If a credit union knowingly charges or accepts interest on a loan at a rate greater than that permitted under this section, it shall be guilty of an offence and—
( a ) all the interest agreed to be paid by the member shall be deemed to have been waived by the credit union; and
( b ) any interest paid on the loan shall be recoverable summarily by the member (or his personal representative) as a simple contract debt.

So! You would be legally entitled to an interest free loan!
Not to be laughed at and NO JOKE!

 

[ClubMan]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

As far as I know when you borrow from credit unions you pay interest on all money including your own money in shares

Surely this is wrong. You pay interest on the loan amount outstanding. You earn dividends on any shares invested or interest on any deposits maintained. The problem is that the cost of borrowing is inflated by the need to keep money in shares/on deposit while borrowing even though you get a return on the latter.

Remember credit unions are supposed to be a non profit organization.

Are you sure about that? I thought that they were not averse to making profits and investing them in the union or returning them to members as dividends?

 

[colc1]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

Surely this is wrong. You pay interest on the loan amount outstanding. You earn dividends on any shares invested or interest on any deposits maintained. The problem is that the cost of borrowing is inflated by the need to keep money in shares/on deposit while borrowing even though you get a return on the latter.

Are you sure about that? I thought that they were not averse to making profits and investing them in the union or returning them to members as dividends?

I think you're right about the profits point clubman

 

[Crugers]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

"...credit unions are supposed to be a non profit organization..."

Credit Unions are "not-for-profit organisations" i.e. their motivation is not simply to make profits. Their raison d’être is to provide service to their members/shareholders/owners. Each shareholder is a member and each member is an owner. It is hard to make a profit from yourself!

If they make a surplus, at year end it should be, and usually is, allocated to reserves, dividends, deposit interest and repayment of loan interest in ways that benefit the members/shareholders/owners.

 

[colc1]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

That would have been my understanding you could do well dividends-wise though (possibly) if other members were taking out a lot of large loans and hence paying a lot of interest assuming this was passed on to dividend holders of course, I understand what you're saying though

 

[ClubMan]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

I suspect that the replies here are based on incomplete original information and therefore make computation of APR and interest impossible.

This has always been a big problem with the CU - for the most part, both past and present, they can't or won't provide APR data for their loans that also takes into account the cost of keeping money on deposit or in shares (as required in most cases) while borrowing. I see that some CUs now quote APRs on loans but I believe that these still ignore the cost of saving at the same time.

However IF (note the big if)
the rate of interest charged by any credit union exceeds the maximum of 1% per month, and
the credit union knowingly charged or accepted the interest
then it could be that the Credit Union would be "...Best for loans...".
Why? Because...

Onlt if they breach the 1% per month (c. 12% APR) limit. This still ignores the additional cost of keeping money in shares/on deposit while borrowing and this is never factored into the equation.

 

[Murt10]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

would i be correct in saying that credit unions are predominant in working class areas? - where credit was generally unatainable and the 'ould' credit union was an alternative to the money lender? that said, my credit union is an dawson street!!

I think you may be wrong there. As far as I am aware, most of the biggest CR. unions in the country, with the exception of Mitchelstown CU. (Golden Vale farmers) are occupational Cr. Unions. Smaller, local Cr. Unions on the other hand, who may be bigger in number, but with a much smaller membership and assets, will lend to people who would not otherwise qualify for credit. The banks would laugh at them, or else charge them an arm and a leg.

Big Cr. Unions that I am aware of are the Garda (x2), AerRianta/Aer lingus, Health service, RTE and the Civil service I'm sure that the teachers and local authorities also have their own CU's as well. If these occupational CU's were to ever come together, they would form a very powerful banking force. Part of the reason for their success is that it is possible to have deductions made at source from your wages and by definition most of the members are working and therefore bad debts should not be as big a problem as might be otherwise the case.

One other thing when comparing rates with other financial institutiuions is that in the event of your death, your debt is written off and the value of your shares are doubled. There is no charge for this insurance.

FWIW, I have found the occupational Cr. Union deductions from salary, by far and away, the best way to save, without too much pain. As soon as you get a pay increase, increment, national wage agreement, whatever, you increase your Cr. union subscription at that time and you don't feel any loss as your weekly income doesn't decrease.

Murt

 

[ClubMan]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

FWIW, I have found the occupational Cr. Union deductions from salary, by far and away, the best way to save, without too much pain. As soon as you get a pay increase, increment, national wage agreement, whatever, you increase your Cr. union subscription at that time and you don't feel any loss as your weekly income doesn't decrease.

It may be the best, or at least a good, approach to enforcing saving discipline on those who otherwise might not have it but it may not be the best way to save as this depends on what the money is going into and what is most appropriate for the individual in question.

 

[Crugers]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

...Onlt if they breach the 1% per month (c. 12% APR) limit...

Eh! Yes, that's what I said!

However IF (note the big if)...

My point was that IF anyone believes their credit union is knowingly charging them more than 1% per month interest they should also believe they are entitled (by law) to that loan interest free!


The original incomplete information I referred to was the post by johnnybegood which was incomplete and required clarification and correction (as requested).

...RIP OFF...
...PLEASE SOMEBODY CORRECT ME IF I AM WRONG WITH MY CALCUALTIONS CAUSE THIS JUST SHOCKS ME...
...SHAME ON YOU!!!!

Especially as it was so over the top!

I see that some CUs now quote APRs on loans...

All CU are obliged by law to quote APR's on their Credit Agreements. Do you know of any that don't?
The calculation method of the APR is strictly governed by law. No it does not factor in or take account of "...the cost of saving at the same time...". Like it or loathe it, good or bad, it is the law.
The law also restricts the withdrawal of funds, shares or deposits, while you have a loan. Again, like it or loathe it, good or bad, it is the law.

...it's not a rip-off as long as these prices were clearly displayed as required by law...

 

[skydancer]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

Nobody seems to take into account the Divedends and the interest rebate paid back into your account at the end of the year.

 

[ClubMan]

Re: Credit Union --- best for loans --- WHAT A JOKE!!

All CU are obliged by law to quote APR's on their Credit Agreements. Do you know of any that don't?

If you search/browse back through the previous discussions about CU borrowings you will see several where people (in particular Brendan on one specific hunt for information) could not get their CUs to quote them APRs. Maybe the requirement that CUs quote APRs on loans is a recent one?

The calculation method of the APR is strictly governed by law. No it does not factor in or take account of "...the cost of saving at the same time...". Like it or loathe it, good or bad, it is the law.

My point is that by requiring people to keep money on deposit or in shares while borrowing the CUs inflate the cost of borrowing over and above the APR quoted - if any.

The law also restricts the withdrawal of funds, shares or deposits, while you have a loan. Again, like it or loathe it, good or bad, it is the law.

You mean the law governing CUs specifically?

In relation to my quote about things not being a rip-off if the prices are clearly displayed then in this case, where the cost of borrowing is inflated by the need to keep money on deposit or in shares inflates the cost of borrowing but this is not clearly explained to the borrower, then there certainly is a potential for a rip-off.