bank loan vs credit union loan

Tubsand

Looking to get a loan of about 10k. Am torn as to whether to ask bank or cu. Which is best in the long run would you think? Tia.

chris85

The one which gives you the best rate

coylemj

Yet another sign of the economic recovery - it used to be 'will I get a loan?', now it's 'should I ask my bank or CU?'

Tubsand

I don't know if either will give it to me but with savings in both I don't know who to ask. My issue is having my savings held by cu. I need to have access to them. I know in ptsb they do a similar loan but I assume with a personal or home improvement loan they don't hold the savings? The rates are online for bank but not cu. Anyone any ideas on the cu rates please?

jaymcg91

Totally depends on your own CU I think. Also my CU doesn't allow access to savings whilst there's a loan out against them.

jathclare

It's good to build a relationship with a CU over the long term as they can tailor lending to your personal circumstances, rather than Group Bank policy. They are also more flexible for early repayments, purpose of loan, speed of approval, collateral, guarantors and terms. No matter how many loans you take out with a bank, you'll always be an ICB statistic to them so it doesn't matter which bank you borrow from. I work in Banking but only use banks for overdraft & mortgage out of necessity. Although I didn't realise the significance at the time, smaller amounts I borrowed and repaid from the CU years ago were key to securing bigger loans particularly when credit dried up a few years back.

However, for higher amounts and longer periods CUs are definitely more expensive. I use a rural CU and they charge 12% interest. There is a 25% annual rebate on charged interest to your shares and you receive a dividend based on the CU's performance paid into your share balance too. Share collateral has crept up since 2008, it used to be 5:1 loan:shares but for high value loans it is closer to 3.5:1.

12% may deter some people as there are better rates out there but I accept it as a premium for the personal service I receive.

Plus, you could eventual stand for election to your CU board and contribute to policy and development. Good luck doing that with a Bank!

Hi Tubsand
Why don't you ask both the Bank & the CU to "sell" you the loan. If only one of them offers you exactly what you want you know where to point your loyalty in the future.
If on the other hand two of them make you an offer, weigh up the advantages & disadvantage. EG you get free life insurance and disability cover with your CU, and you can repay earlier. Maybe the bank has something to add to the offering. Compare both APR's and the TOTAL interest paid back over the loan term

naughtysmurf

I'm a big fan of credit unions, they will be much more flexible than the bank with you also if things change in the future & you start to struggle with repayments

coylemj

naughtysmurf wrote: »

I'm a big fan of credit unions, they will be much more flexible than the bank with you also if things change in the future & you start to struggle with repayments

+1 Credit unions are far more ethical than banks, it's not like one of them would give your PPS number to a firm of private detectives to hunt you down if you do a runner.

Oh wait....

naughtysmurf

Every barrel will have a few bad apples, been with my credit union +30 years, never refused a loan, they once gave me a short term interest only loan that I didn't qualify for so I could help out a family member over a 6 week period.

Always found them very helpful & friendly

As regards the 12% rate, not 100% sure but think that rate falls as the outstanding loan amount falls but could be wrong there. I once looked at a car loan a few years back & compared it to the main dealer hp finance package, much of a muchness as regards repayments at the time

On the interest rate, the rate stays the same for the life of the loan, however you are only charged interest on the reduced and reducing balance. That way you can have some control over the amount of interest you pay. (The faster you pay, the less interest you pay). When you sign up for a HP car loan, you pay all the interest you were quoted regardless of how soon you repay.

On the point of "hunting you down", this is interesting, because most people would insist that their credit union or bank should make all possible efforts to collect money that other customers/members borrowed. Lets face it, if Joe Soap down the road doesn't repay his loan, then you pay it one way or another. Not condoning the PPS number thing, but easy on the dramatics please. No one gets "hunted down" in Ireland. Borrowers who stop paying after they move address, should be made aware that their debt still needs repaying. We all have the protection of the Consumer Directive and the Financial Ombudsman to protect against mal practice or aggressive lenders.