Credit Union Intrest Rate

Green Mile

I was thinking of taking out a loan in a few months or in a year. I'm 27 and I've never taken a loan in my life.

It's going to be a personal loan and I was looking at various banks and wha tthey offer (which is about 10.3% on average) and I think that is way too much.

The credit union was suggested to me but there isn’t much information online.

I understand that you have to be saving with them for a while, showing you can save, showing that you took a loan and that you were able to pay it back etc etc, Lets say I meet that criteria.

What is the interest rate (give-or-take as each credit union may vary)?
So lets say I have €2,000 in savings and I want to take €4,000 as a loan.The 2k is locked and I now have a cheque worth 4k.

Is the interest calculated against the full 4k or the 2k that belongs to thecredit union?

Can anyone shed some light on my two questions?

tony81

Interest rate is 7% in Dundalk but that may vary in other credit unions.

Interest is calculated on loan amount. In your case €4k. I've read credit unions require 25% of loan balance in shares (deposits) therefore only €1k would be locked.. Not sure if this is a hard and fast rule as I took out a €3.5k loan with only a few hundred as a balance.

corkonion

The interest is based on the £4k, however it decreaces with each payment you make as it is only calculated on the outstanding balance and a reasonable dividend is paid to you yearly on your €2k savings.

Green Mile

Right, so that isn't bad.

I wonder do banks charge interest on the reducing balance or on the principle loan?

I better join a credit union now so I can meet the criteria in my op.

tony81

Ok, i read into it out of an interest!

1. You request the loan. While savings, in particular a history of savings, will help you get a loan, you don't necessarily need 25% in c.u shares (savings)

2. Loan either approved, declined, reduced amount offered, guarantor required, etc.

3. Assuming loan of €4k granted and you have €2k in shares. You cannot make a withdrawal that will reduce your shares to 25% of loan value. However with c.u board approval may be permitted to.

4. At any stage you may* offset your savings balance against the loan amount. However, unless you do this you will be charged interest on €4k.

*i've read about people being refused this request.. Not sure if the c.u's are allowed to refuse it or if someone was just dealing with an incompetent clerk.

Interest is charged on outstanding loan amount as far as I'm aware.

Green Mile

I'm back, (op here)

So if I have 2k in savings and I take a loan from the bank. I'll be charged 11.5% on my loan of 2k (so i'll have the 4k in total cash)

I could go with the credit union but my 2k will be locked down and the interest will be 7% on the 4k loan.

So in a way, the bank is cheaper. (I know, not as flex' or as understanding etc) i.e. 11.5% is cheaper on 2k than the CU offering 7% on 4k.

Even though a bank offering 11.5% seems to be the cheapest, it is still very very expensive in my opinion.

Is there another alternative? Can I get a loan "to fix my mams kitchen"
would that work? I know car loans, for example are cheaper but I don't want a bank writting up a draft made payable to a car company.

I don't hav many options do i?

tony81

Op, you're making an assumption that the credit union won't give you a loan of €2k without a €2k balance, and that your €2k on deposit will be locked in. You're probably wrong on both counts. Please read advice in thread.

BuffyBot

..and seeking advice of dishonest dealings is not permitted on this forum. Please don't do it again.