What is an Interest Rebate?
An interest rebate is a refund of loan interest back to members who paid loan interest on their loans during the preceding financial year. A credit union may only pay an interest rebate if it has also paid a 2% dividend on member's shares. The interest rebate is paid at the same rate to all borrowing members.
Interest rebates have become very popular with credit unions in recent years. This has probably occurred due to the reduction in lending rates available to our members from other financial institutions as credit unions try to compensate members for the higher rates being charged. For many credit unions the interest rebate represents a cautious step that prepares the credit union for a cut in its lending rate. When a credit union sees that has the ability to pay a dividend and
I went to the AGM of my local Credit Union, Sandymount on Wednesday night. There were about 100 members in attendance, with an average age of 60+. If this is indicative of the average age of the membership, the movement will die out over the next few decades.
With over 54% of all personal unsecured loans sourced from Credit Unions it is probably wishful thinking on the banks part that they will lend to most people.Credit Unions had a key role when we were a poor society and banks would not lend to poor people. Now we are a very rich country and the banks will lend to most people.
Research confirms that credit unions are Ireland‘s leading source of social finance with over € ½ bn in such loans approved at mid-2004. Finance Minister Cowen commented that "the benefits to the community of this type of lending are significant - including employment creation, community education and environmental enhancement…”There is a problem of access to financial services for some people, but I understand that the Credit Union movement has become middle class in recent years and has moved away from dealing with this problem.
Well they’ve survived and grown without your need to borrow from them. However you can be comforted by the fact that your savings are being put to good socially responsible use locally.So do they have a future at all? I am a member but I am unlikely to borrow from them. The cheapest loan is 5.7% ( after the rebate) for loans over €30,000. Why would I pay 5.7%, when I can extend my home mortgage at 2.9%? They pay 2% on deposits, but I can get 3% from Northern Rock.
Eeeehh! No!The good news is that they seem to have moved away from insisting that you keep a matching deposit. They should all state their policy on this publicly.
There are currently 136 million people served by more than 43,000 credit unions in 91 nations around the world. Some of the worlds biggest credit unions are in USA, Canada and Australia. ILCU Development Fund doesn’t bother spending money on encouraging growth in these 1st World economies it prefers to make a difference in places like Poland, Russia, Azerbaijan, Outer Hebrides, most of Africa and the like.Interestingly, they seem to be encouraging the growth of Credit Unions in Russia and Africa and maybe that's the whole point. They are appropriate for 2nd and 3rd World economies, but maybe they are not appropriate for a rich country like Ireland.
You probably right there! If you want “…complex financial services…” then go to the banks. I’d hold off commenting on the mortgages just yet. Having legal constraints on the upper amounts and term of loans has held back CU’s from being able to offer these services. But Brendan Logue of IFSRA says his desk is overflowing with applications from CU’s applying for permission to go down the mortgage route. As soon as they implement a “…clean desk policy…” in IFSRA the situation and outlook may change dramatically.I think that they have had a very useful purpose in local community lending, but may not have any role in complex financial services such as insurance or mortgages.
I'd bet a fiver that the average age of those attending the BOI, AIB, EBS, INBS AGM's was pretty similar. I wouldn't read anything about age of members from this.Brendan said:I went to the AGM of my local Credit Union, Sandymount on Wednesday night. There were about 100 members in attendance, with an average age of 60+. If this is indicative of the average age of the membership, the movement will die out over the next few decades.
There are no penalties with repaying variable rate car/personal/house loans early. Such penalties would breach the Consumer Credit Act.munstershug said:2. The key advantage the CU offers me personally is teh ability to repay the loan early without penalty. My derstanding is amost bank car loans are fixed?
Am I correct or misguided!
CGorman said:“The really serious problem facing the credit unions is that they are massively under-lent,”
Brendan said:So do they have a future at all? I am a member but I am unlikely to borrow from them. The cheapest loan is 5.7% ( after the rebate) for loans over €30,000. Why would I pay 5.7%, when I can extend my home mortgage at 2.9%? They pay 2% on deposits, but I can get 3% from Northern Rock.
Brendan
1. I should not pay off such a short term purchase over a long term like a mortgage
To become a CU member you must have some savings / shares. Standard Rules for ILCU affiliated CU's states a minimum of one, maximum of ten shares as a prerequisite for membership. (1 share = €1).Brendan said: I am getting conflicting messages on this savings requirement.
I presume you meant might! Dependant on the T&C's.Brendan said: I would recommend Credit Unions if they were open and clear about this issue of lending
There is always a requirement to have savings, the question is how much is the absolute minimum!Brendan said: If there is no requirement to have savings
GE Money: ...depending on individual applicant status
AIB: Credit facilities are subject to repayment capacity and financial status and are not available to persons under 18 years of age. Security may be required
BOI: Couldn’t access theirs but I’d bet they quote it somewhere
Hi Crugers - Thanks for the detailed explanation. Would it be the common view in CU circles that the legal requirements are (at best) disjointed. To have a requirement that you can't reduce your balance below 25% of the loan, without have a requirement that you have to have 25% to get the loan actively discriminates against those who have money on deposit. Indeed, it may well encourage them to move their funds elsewhere before getting a loan to avoid having the 25% tied up.Crugers said:To be eligible for a loan you must be a member. To be a member you must have some shares so there is no 'IF' about it.
If a member has a loan that member, according to the CU Act, can't reduce his share balance below 25% of his loan value.
However it is not a requirement in the CU Act to have any percentage of the loan value before you get a loan. The CU ACT only requires you to be a member (and that could be as few as one to ten shares). So it would be legally possible for a member of a Credit Union to have Shares of €1 and get the maximum loan permitted within the CU ACT. It wouldn’t be common practice!
Some CU's do have Loan Policies that require members to have a certain value of shares before they will grant a certain value loan. That is their policy and their policy is agreed by their Board who are elected by their members. It shouldn't be a secret! It should be explained to applicants!
Slim said:The need for electronic fund transfer and ATM services is hugely important
Riddler said:The future is in issues of sustainability and growth (not current product/rate arguments or bias)..can we focus on this first and then solve for the current set of problems ?
R
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