9k credit union loan

theperson2014 · 14-01-2015 2:28pm #1

I'm considering borrowing 9k from my local credit union. I've over 22k in my account so it might stand to me. I'm so wondering if I could get away with paying back €50 a week over a few years and what would I expect to pay in interest?

14-01-2015 4:00pm

Why do you want to borrow? Why not just use some of the 22k?

Kenno90 · 15-01-2015 10:36am

Unless its an interest free loan (which it wont be) you'll be saving money if you use some of the 22k.

From the credit union website

* This equates to a maximum 12.68% APR. If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating.

Loan Calculator Results

Monthly repayment: €200.19
Loan amount: €9,000
Interest rate: 12.68%
Term: 5 years
Cost of Credit: €3,011.39

TrishSimon · 15-01-2015 10:47am

Kenno90 wrote: »

Unless its an interest free loan (which it wont be) you'll be saving money if you use some of the 22k.

From the credit union website

Loan Calculator Results
Monthly repayment: €200.19

Loan amount: €9,000

Interest rate: 12.68%

Term: 5 years

Cost of Credit: €3,011.39

Agree here on this one take the 9K from your savings you'll still be left with 13K which is a great amount to have in the credit union and just start saving again to build it up.

dobsdave · 15-01-2015 12:01pm

theperson2014 wrote: »

I'm considering borrowing 9k from my local credit union. I've over 22k in my account so it might stand to me. I'm so wondering if I could get away with paying back €50 a week over a few years and what would I expect to pay in interest?

Because you will be borrowing within your savings, they should give you a rate of approx 7%.
I did this in August and got 7.2%
As has been said above, you're paying interest on borrowing your own money.
I did it, as I find it hard to save, if that makes sense.
On 9k over 5 years that would be 1500 interest over the term.
I did it on 2k over 12 months.

theperson2014 · 15-01-2015 12:40pm

I'm not touching the 22k as it's my savings. I work so I can pay it back but I think 3000 in interest is way too much. By the way, I sincerely appreciate you doing the sums

15-01-2015 12:48pm

theperson2014 wrote: »

I'm not touching the 22k as it's my savings.

Is there some penalty for taking it out or something? Treat it as an interest-free loan to yourself and "pay it back" by monthly deposits to your savings account e.g.:

Monthly repaymentdeposit: €150
Loan amount: €9,000
Interest rate: 0%
Term: 5 years
Cost of Credit: €0

Saves yourself €50 a week for 5 years. Taking out a loan instead is bizarre

chris85 · 16-01-2015 4:34am

theperson2014 wrote: »

I'm not touching the 22k as it's my savings. I work so I can pay it back but I think 3000 in interest is way too much. By the way, I sincerely appreciate you doing the sums

I really dont understand the logic here. It will cost you more money to get the loan than just use your savings so unless you have a specific need to use this savings for soon than it is just a mental thing that you don't want to take from your savings as commons sense would suggest you use the money you already have which costs you nothing.

JKM · 16-01-2015 4:41am

28064212 wrote: »

Treat it as an interest-free loan to yourself and "pay it back" by monthly deposits to your savings account e.g.:
Monthly repaymentdeposit: €150

Loan amount: €9,000

Interest rate: 0%

Term: 5 years

Cost of Credit: €0

Saves yourself €50 a week for 5 years. Taking out a loan instead is bizarre

+1 on this.

Set up a standing order for the 'loan repayment', pretend you're paying the credit union back if you must. You've done well to save 22k, don't set yourself back by paying interest on a loan when you don't have to.

Tonto67 · 16-01-2015 4:58am

You are mad to essentially borrow your own money and pay interest on it. Take 9k from your savings and consider it an interest free loan to yourself. Divide 9000 by the term and pay this back into the CU weekly/monthly.

You are fooling yourself thinking you are not touching your savings by taking a loan instead. Once you have the loan you cannot withdraw your savings below ~1/2 the principle outstanding, so that money is essentially out of your reach anyway.

I understand the sentiment of not wanting to touch your savings and i admire it, I wish more people were as cautious but it is misguided. The saved interest is far better off in your pocket than the CU and it is a significant sum.

Should you decide to go for the loan €50 off the principle pw would be a ~3.5 year payback with interest payments (assuming a 7% rate) starting at ~€12 pw decreasing as payments are made.

TrishSimon · 16-01-2015 12:26pm

theperson2014 wrote: »

I'm not touching the 22k as it's my savings. I work so I can pay it back but I think 3000 in interest is way too much. By the way, I sincerely appreciate you doing the sums

So instead of taking out 9K you want to pay back over 12K ??
That to me does not make sense you could take the 9K out be left with 13K and then add 12K more by savings and would have 25K.

You are causing yourself more hassle by taking a loan out but if you so wish go ahead.

TrishSimon · 16-01-2015 12:29pm

Tonto67 wrote: »

You are mad to essentially borrow your own money and pay interest on it. Take 9k from your savings and consider it an interest free loan to yourself. Divide 9000 by the term and pay this back into the CU weekly/monthly.

You are fooling yourself thinking you are not touching your savings by taking a loan instead. Once you have the loan you cannot withdraw your savings below ~1/2 the principle outstanding, so that money is essentially out of your reach anyway.

I understand the sentiment of not wanting to touch your savings and i admire it, I wish more people were as cautious but it is misguided. The saved interest is far better off in your pocket than the CU and it is a significant sum.

Should you decide to go for the loan €50 off the principle pw would be a ~3.5 year payback with interest payments (assuming a 7% rate) starting at ~€12 pw decreasing as payments are made.

Very good advice here, I have about 3.5K savings in the credit union and a loan of about 4K, you cannot touch your savings once a loan is drawn down so think carefully before you take one out because what if you wanted the remaining money in your savings for a house deposit or what ever you would be stuck to clear the loan before you could get it out.

dobsdave · 16-01-2015 1:52pm

TrishSimon wrote: »

Very good advice here, I have about 3.5K savings in the credit union and a loan of about 4K, you cannot touch your savings once a loan is drawn down so think carefully before you take one out because what if you wanted the remaining money in your savings for a house deposit or what ever you would be stuck to clear the loan before you could get it out.

Unless you have more savings than owed, then you can clear the loan from savings if you so wish.

Tonto67 · 18-01-2015 2:37am

dobsdave wrote: »

Unless you have more savings than owed, then you can clear the loan from savings if you so wish.

In that case you may as well have taken the money from savings from the start and saved yourself the trouble of an application and the expense of interest payments.

dobsdave · 18-01-2015 11:03am

Tonto67 wrote: »

In that case you may as well have taken the money from savings from the start and saved yourself the trouble of an application and the expense of interest payments.

I was replying to someone who said you cant touch your savings once the loan is drawn down.
It was not in relation to the OP's situation.

simoniz · 06-02-2015 12:44am

looks like they make money on your own money then? honestly why don't you get your 9k and after that start saving again. just imagine you're paying for your debt.

yabadabado · 06-02-2015 12:53am

theperson2014 wrote: »

I'm not touching the 22k as it's my savings. I work so I can pay it back but I think 3000 in interest is way too much. By the way, I sincerely appreciate you doing the sums

that is absolutely mental.You wont touch your savings but are willing to pay the CU interest on essentially your own money.
Why cant you withdraw the 9K and increase the payments you usually would pay in per week to build back up your savings.
Pay in €50 per week and you will have 9K saved in less than 3.5 years.

adam88 · 10-02-2015 1:37pm

I think borrowing against your saving is a very sensible thing to do mainly because no matter how hard you'll try you'll never replace the money.

Secondly you get a good rate some credit unions offer 5.5% savers loans,

finally and most importantly is the insurance the credit union offers mostly free of charge or for a very very small fee this means should you die during the term of your loan you loan is written off
And your family will get your FULL savings plus death benifit insurance which is sometimes calculated on your savings rather than a flat figure

hfallada · 10-02-2015 1:45pm

adam88 wrote: »

I think borrowing against your saving is a very sensible thing to do mainly because no matter how hard you'll try you'll never replace the money.

Secondly you get a good rate some credit unions offer 5.5% savers loans,

finally and most importantly is the insurance the credit union offers mostly free of charge or for a very very small fee this means should you die during the term of your loan you loan is written off
And your family will get your FULL savings plus death benifit insurance which is sometimes calculated on your savings rather than a flat figure

Its not a rational thing to do at all! If you can save up to 22k once and your circumstances are the same. You can save up to 22k again. Savings are savings. They will have to be spent at some point in time. Taking out a loan when you already have money is completely irrational.

With deflation at the moment. Even with 5.5% interest rate, the loan will really be costing 6%(deflation increases the burden of the loan). The chances of the OP dying are minimal anyway. AFAIK most credit union write off loans due to death anyway.

OP use your savings. There is no reasons at all not to. Other than looking having 22k on a bank statement to look at.

10-02-2015 1:51pm

adam88 wrote: »

I think borrowing against your saving is a very sensible thing to do mainly because no matter how hard you'll try you'll never replace the money.

That makes absolutely no sense whatsoever. If they take out a loan, they will have to pay back around €200 every month. If they use their savings, they can pay that €200 directly into their savings account, and they will have an extra €3000 (approx.) at the end of the 5 years.

lukesmom · 13-02-2015 12:53am

The mind boggles.

BorneTobyWilde · 13-02-2015 1:30am

It's a discipline thing

ectoraige · 13-02-2015 1:37am

It's also a rainy-day thing. Circumstances change, and loans can be refused, just when you really need them. Income protection schemes aren't cheap either.

Greenmachine · 13-02-2015 12:55pm

OP out of curiosity what kind of period did you save this money over, and what are your regular contributions i.e. how much do you save per week/month etc.
I don't agree entirely with what some poster have said, I do think in some cases, it can be useful to take out a covered loan, to build up a credit history, I don't think it is strictly necessary in your case. To give an example of the above, a CU member has €2000 in saving, and plans to get married 18 months from now. They have never borrowed money, and have always bought everything outright, cars, home computers, phones etc. They have budgeted €8,000 for the wedding. This month they are doing some upgrades in the home and borrow €2000 for the work and agree weekly repayments of €39.84 over 52 weeks. The loan will have cost the borrow approx €71.50.
*based on my local CU calculate, individual credit union will vary.
If the borrower then maintains these contribution for the next 26 weeks (26*39.84
they will have saved an additional 1035.84 saved putting them in a good position to borrow up to 3x their savings.

OP you have substantial savings, and they are a credit to you, There are a limited number of things at this point that would require a loan as big or larger than your savings, such as a new car purchase, a house purchase, or major home refurbishments/extension.

Rabbo · 15-02-2015 1:07pm

BorneTobyWilde wrote: »

It's a discipline thing

It's not a discipline thing if you set up a standing order similar to what you would have if you had a loan

Get Real · 15-02-2015 1:16pm

I'd also +1 taking it out of savings therefore it'd be cheaper to "borrow" and there'd be no interest to pay, so you could "pay back" 50 quid a week as planned, but it'd only take 3.5 years as opposed to 5.

However (and this is something I dont know) :

For credit rating purposes, would it be good to take out the loan, ie: if you don't have any record of having ever borrowed a sum of cash, how will you show to a bank in the future you'll have a reliable re-payment history should you want to take out a mortgage etc?

15-02-2015 1:28pm

Get Real wrote: »

However (and this is something I dont know) :

For credit rating purposes, would it be good to take out the loan, ie: if you don't have any record of having ever borrowed a sum of cash, how will you show to a bank in the future you'll have a reliable re-payment history should you want to take out a mortgage etc?

I can't say for sure, but I would imagine a reliable savings history would be far more effective than a reliable re-payment history.

Atlantic Dawn · 15-02-2015 1:30pm

Get Real wrote: »

However (and this is something I dont know) :

For credit rating purposes, would it be good to take out the loan, ie: if you don't have any record of having ever borrowed a sum of cash, how will you show to a bank in the future you'll have a reliable re-payment history should you want to take out a mortgage etc?

A savings history will always look better than a repayment history.

hfallada · 15-02-2015 1:35pm

Get Real wrote: »

I'd also +1 taking it out of savings therefore it'd be cheaper to "borrow" and there'd be no interest to pay, so you could "pay back" 50 quid a week as planned, but it'd only take 3.5 years as opposed to 5.

However (and this is something I dont know) :

For credit rating purposes, would it be good to take out the loan, ie: if you don't have any record of having ever borrowed a sum of cash, how will you show to a bank in the future you'll have a reliable re-payment history should you want to take out a mortgage etc?

But a lot of credit unions used( most not any more) didnt report loans to the credit rating agency used in Ireland. If op credit union doesn't report to the credit rating agency, then they won't get a credit rating from this loan.

They can get a credit rating from having an overdraft or even a credit card. This is will be a lot cheaper than getting a 9k loan

9k credit union loan

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