Credit Union loan to pay off lump sum on mortgage? Good/Bad idea???

B

byrnzie

Guest
Hi, I was wondering one day with a little too much time on my hands! I have just been given approval on 11000 euro loan from the credit union for a car. I have thought it over and have decided not to change the car. So i got to thinking... If i paid the 11000 lump sum off my mortgage, mortgage is 90K with 18yrs to go at present, and pay off the credit union 240 per month until its paid off, obviously my principal in mortgage terms would be reduced, so over the term of my mortgage would this be a better idea or just decline the lump sum from the CU altogether? I know obviously it all comes down to APR and time of repayment etc, but is there a simple formula i can use in order to solve this puzzle. Hope this isnt too silly a question but in these straightned times you have to think it all through.
Thanks for your time.
B.
 
Madness. It is more than likely that the interest rate on the credit union loan is higher than the mortgage rate. If you can afford it, the thing to do is to agree with your mortgagee to increase your payments and shorten the term of the mortgage.
 
I would have to agree with Half Pay. The interest rate on the CU loan is probablyt a lot higher so you would end up paying a lot more. What we have done is increase our payments. Basically we have kept the same replayments as we had when the tracker rate was higher. We also sent a letter to the bank asking them to ensure the extra payments are taken off the capital portion of the mortgage.

Lastbuilders
 
You had anticipated paying €240 pm for the next few years on the car loan.

Now that you are not going ahead with it, you could increase your mortgage payments by any amount up to the €240 you would have been giving to the CU, save the balance, and when the car loan would have been paid off, use the money saved to pay a lump sum off your principle.
 
See if you can get a mortgage offset account where any savings in a transaction account are offset against the mortgage principle before interest calculation.

You would be absolutely mad to use a credit union loan to pay a lump sum off your mortgage.

You would just be replacing cheap debt with more expensive debt.
 
Hi, Yea was thinking it was too good to be true! Thanks for the info and advice.
B
 
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