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Quick hypothetical re: Credit Unions

  • 25-09-2012 9:05pm
    #1
    My name is URL
    Registered Users, Registered Users 2 Posts: 25,069 ✭✭✭✭


    If a person has say €2,000 in shares, and a loan of €3,000; is there any legitimate reason as to why said shares can not go towards paying off interest on the loan?


Comments

  • #2
    Random
    Closed Accounts Posts: 19,080 ✭✭✭✭Random


    the shares are security against the loan so you cant touch them - generally.


  • #3
    My name is URL
    Registered Users, Registered Users 2 Posts: 25,069 ✭✭✭✭My name is URL


    Random wrote: »
    the shares are security against the loan so you cant touch them - generally.


    But isn't there a drop-off point in which the security falls in line with the loan amount (outstanding)?

    If €2,000 was used as security for a €5,000 loan, for what legit reason is there not an equal depletion of security required to maintain the loan when it more than halves in size?


  • #4
    Random
    Closed Accounts Posts: 19,080 ✭✭✭✭Random


    i can only speak for how it was with my credit union. the entire shares are security against the loan. you can only access the shares once they fall below the loan amount. then you can only withdraw shares until the shares match your loan balance.


  • #5
    wmpdd3
    Registered Users, Registered Users 2 Posts: 9,624 ✭✭✭wmpdd3


    I did this, I approached the Credit Union as I was unable to keep up my repayments.
    I had 3 years left on a loan, I asked for the loan to be spread over 5 years again, as I could afford those repayments.

    They agreed but only if I used my shares as part payment before they approved the re-structuring. This reduced the repayments even further.


  • #6
    Anyone
    Registered Users Posts: 3,376 ✭✭✭Anyone


    My name is URL wrote: »
    If a person has say €2,000 in shares, and a loan of €3,000; is there any legitimate reason as to why said shares can not go towards paying off interest on the loan?

    One of the main principles of Credit Unions is to encourage people to maintain their capital. Withdrawing shares or transfering them, is basically going against that principle.

    However, if a persons circumstances have changed to a point where they are unable to meet their repayments, a lot of credit unions will allow the transfer of shares and a restructuring. I would only use it as a last measure though, as the Financial Regulator has issued instructions to credit unions, to not lend any further to people have refinanced their loans(even if their circumstances change back for the better).

    Edit. One other thing, the transfer of shares to a loan does not constitute a payment.


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  • #7
    Sidetracker
    Closed Accounts Posts: 99 ✭✭Sidetracker


    The principal of the practice is sound, however the logic is bureaucratic nonsense. If you are struggling to pay your loan and the CU is putting on interest, whilst NOT paying interest on your shares, how can it make sense to lock away your asset .


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