Collateral

MagicSean

I have a home loan and savings account with a cresit union. For simplicity sake lets say my savings are 2500 and my loan is 20000. I tried to withdraw money from my savings but was told I couldn't as it is being held as colateral for my loan. Then I asked if I could pay 2000 off my loan balance and reduce the weekly payments. I was told I couldn't do this either because the money was colateral and my savings needed to be 25% of the loan balance. So basically I have no access to my savings. Is this standard practice? It wasn't mentioned when I got the loan. In fact I was told that it is encouraged to pay off the loan early. What is the point of this collateral?

Pablo Sanchez

Yep its pretty standard, the only time you will see your 2500 is when you pay your loan off, or when your loan is down to 2500 and you use it to pay off the balance.

The point of the collateral is to get you to pay off your loan!

MagicSean

Pablo Sanchez wrote: »

Yep its pretty standard, the only time you will see your 2500 is when you pay your loan off, or when your loan is down to 2500 and you use it to pay off the balance.

The point of the collateral is to get you to pay off your loan!

But thats what I wanted to do. I wanted to pay off part of it and up the repayments for the rest.

amen

If you have a loan of 20,000 and savings and off 2,500 and use that to reduce your loan to 17,500 what is to stop you not paying the rest of the loan?

Nothing and thats why the CU hold onto the savings.

MagicSean

amen wrote: »

If you have a loan of 20,000 and savings and off 2,500 and use that to reduce your loan to 17,500 what is to stop you not paying the rest of the loan?

Nothing and thats why the CU hold onto the savings.

But if I decide to walk away now then they are in the exact same position.

Pablo Sanchez

Currently they are charging you interest on the whole amount that is outstanding, the 2.5 does not figure into it, i presume they factor this in when deciding on their interest rates.

jimoc

k_mac wrote: »

I have a home loan and savings account with a cresit union. For simplicity sake lets say my savings are 2500 and my loan is 20000. I tried to withdraw money from my savings but was told I couldn't as it is being held as colateral for my loan. Then I asked if I could pay 2000 off my loan balance and reduce the weekly payments. I was told I couldn't do this either because the money was colateral and my savings needed to be 25% of the loan balance. So basically I have no access to my savings. Is this standard practice? It wasn't mentioned when I got the loan. In fact I was told that it is encouraged to pay off the loan early. What is the point of this collateral?

This is in the standard terms and conditions that everyone signs when they take out a credit union loan.

walshkvn

Well you learn something new every day ... must look at the T&Cs again. Can't say I blame them though.

jimoc

Some credit unions are a bit more lenient then others in enforcing this though.
some will allow you to remove small amounts of the savings, but never all of it, while others wont let you touch it.