Pay CC bill with Credit Union Loan?

dylbert

Just looking for a bit of advice. I currently have an credit union loan of €5800with 2 and half years left and savings of €5800, I also have about €2000 outstanding on a credit card.

Would it be better to

1. take a top up loan from the credit union to get rid of the credit card

2. use my shares to clear the credit union loan then use the €70 p/w which was going to the credit union to pay off the CC instead?

Cheers.

naughtysmurf

I'd do option 1

Once your €5800 shares savings is gone, it's gone, could take a while to build it back up again, leave your shares where they are, that's what I'd do anyway

Jacovs

Never make debt to repay debt.

Id go for option 2.

How much of the 70/week that you are paying at the moment is going towards interest that could be money in your pocket?

I assume you are also currently paying off your credit card. You could clear the credit union debt using the credit union savings and then if you would like some more money in your pocket right now use for example 20 of the 70 (which normally wouldve gone to paying off interest) to pay off extra on your credit card, and also have 50 left to spend or save or clear more off credit card, whichever need is greatest at the moment.

naughtysmurf

Would the credit union allow the op to withdraw 2k from their savings while owing 5800, not so sure they would

chris85

naughtysmurf wrote: »

Would the credit union allow the op to withdraw 2k from their savings while owing 5800, not so sure they would

This would be the best option OP, if the CU allow this it would be the best option.

dylbert

naughtysmurf wrote: »

Would the credit union allow the op to withdraw 2k from their savings while owing 5800, not so sure they would

Actually never thought of this, I'll give them a call to see.

naughtysmurf

Let us know, best of luck

Triangla

I reckon you have only a year and half left if you're paying €70 per week.

You should have €5,800 paid off at the end of Jan 2015.

Scortho

Jacovs wrote: »

Never make debt to repay debt.

Id go for option 2.

How much of the 70/week that you are paying at the moment is going towards interest that could be money in your pocket?

I assume you are also currently paying off your credit card. You could clear the credit union debt using the credit union savings and then if you would like some more money in your pocket right now use for example 20 of the 70 (which normally wouldve gone to paying off interest) to pay off extra on your credit card, and also have 50 left to spend or save or clear more off credit card, whichever need is greatest at the moment.

On the never make debt to repay debt, it's more financially prudent to take out a lower interest loan to clear the higher interest loan.
If you owe 2k on a credit card at 18% and are making a minimum payment, it makes sense to borrow the 2k of the credit union and pay 10%.

mickdw

It is slightly mad to be paying interest on 5800 loan when you have the same in savings. So you end up paying interest on money they never gave you and wont let you withdrawn any of your funds either. If thats not the scam of the century, I dont know what is.

It would only make sense if your savings were available to you if you want them. If not, its utter lunacy.

Scortho

mickdw wrote: »

It is slightly mad to be paying interest on 5800 loan when you have the same in savings. So you end up paying interest on money they never gave you and wont let you withdrawn any of your funds either. If thats not the scam of the century, I dont know what is.

It would only make sense if your savings were available to you if you want them. If not, its utter lunacy.

Yep
The loan to savings ratio for credit unions is generally 4:1 I think?
If I was the op I'd clear the credit card debt with the credit union savings, and then offset any remainder allowable under the agreements of the credit union loan towards the credit union loan.
I know if if was my credit union, on a loan of 5800, security would be 1450.
It would save him a fair whack in interest.

naughtysmurf

mickdw wrote: »

It is slightly mad to be paying interest on 5800 loan when you have the same in savings. So you end up paying interest on money they never gave you and wont let you withdrawn any of your funds either. If thats not the scam of the century, I dont know what is.

It would only make sense if your savings were available to you if you want them. If not, its utter lunacy.

Not mad at all, the CU gave the OP a loan, the OP may not have had 5800 in savings at the time of getting the original loan anyway, OP pays back the loan & when finished, still has 5800 in savings, where's the scam?

The CU may well insist that the OP's shares level don't fall below a certain point while paying off the loan, in case the OP doesn't keep up the repayments, that's fair enough I would have thought

Jacovs

naughtysmurf wrote: »

Not mad at all, the CU gave the OP a loan, the OP may not have had 5800 in savings at the time of getting the original loan anyway, OP pays back the loan & when finished, still has 5800 in savings, where's the scam?

The CU may well insist that the OP's shares level don't fall below a certain point while paying off the loan, in case the OP doesn't keep up the repayments, that's fair enough I would have thought

Considering the OP said the 5800 loan will take 2,5 years to pay back @ 70/week, that means after 2,5 years he will have paid 9100 and have the 5800 left in shares.
If he clears the loan using the shares he will have all of the 9100.

9100 > 5800

dobsdave

naughtysmurf wrote: »

Would the credit union allow the op to withdraw 2k from their savings while owing 5800, not so sure they would

What 2k is everyone talking about????

The op is looking to use 5800 in cu savings to clear cu loan.
The money used to service the cu loan presently, then goes to service the cc.
Or am I missing something?

OP in my opinion, taking a top up from CU to clear the cc is the best option.

Jacovs

dobsdave wrote: »

What 2k is everyone talking about????

The op is looking to use 5800 in cu savings to clear cu loan.
The money used to service the cu loan presently, then goes to service the cc.
Or am I missing something?

OP in my opinion, taking a top up from CU to clear the cc is the best option.

He has 5800 loan at credit union, 5800 savings at credit union AND 2000 credit card debt.
His first option is to get a further 2000 loan from credit union to clear credit card. Thus 7800 loan from credit union and 5800 savings and 0 credit card debt.

naughtysmurf

I'm a bit unsure now after reading the OP again whether or not they are someway into paying off an original loan amount of 5800 or have 5800 remaining on a larger amount borrowed?, I read it originally as they currently owed 5800

I know with my own credit union, there interest rate is about 12% starting off, with the rate falling as the loan amount decreases, CU car loans are different, think about 7%

mickdw

naughtysmurf wrote: »

Not mad at all, the CU gave the OP a loan, the OP may not have had 5800 in savings at the time of getting the original loan anyway, OP pays back the loan &, still has 5800 in savings, where's the scam?

The CU may well insist that the OP's shares level don't fall below a certain point while paying off the loan, in case the OP doesn't keep up the repayments, that's fair enough I would have thought

Well would you agree that if the op had 5800 in savings then took a loan for that exact amount and wasnt allowed touch any of the savings below the level of loan remaining and then paying interest on the entire loan amount - that this would be a laughable setup?
In cases like that, surely interest should be limited to any borrowings in excess of savings. Anything ekse is money for nothing for the CU.

naughtysmurf

mickdw wrote: »

Well would you agree that if the op had 5800 in savings then took a loan for that exact amount and wasnt allowed touch any of the savings below the level of loan remaining and then paying interest on the entire loan amount - that this would be a laughable setup?
In cases like that, surely interest should be limited to any borrowings in excess of savings. Anything ekse is money for nothing for the CU.

No, if I had 5800 in savings in a credit union account and needed 5800 for say, home improvements, I would ramble in to my credit union, apply for the loan, get it, repay it over the agreed period of time while continuing to through a few bob into my savings also so once the loan is paid in full I would still have +5800 in savings

If I just went in and took all my savings out, then I would have no savings at all, it would all be gone forever, the major benefit of CU's is that they are extremely flexible compared to banks and will adjust repayments if required

As regards the interest AFAIK it's about €4 per thousand on a decreasing scale but I could be wrong on that

I also wouldn't have all my savings in one institution, credit union or other

dylbert

naughtysmurf wrote: »

I'm a bit unsure now after reading the OP again whether or not they are someway into paying off an original loan amount of 5800 or have 5800 remaining on a larger amount borrowed?, I read it originally as they currently owed 5800

I know with my own credit union, there interest rate is about 12% starting off, with the rate falling as the loan amount decreases, CU car loans are different, think about 7%

It was a €12,000 car loan over 5 years, think the rate was 8% but I'm not sure.

jester77

So you have:

Savings: 5800
Debt: 7800 (5800 loan + 2000 credit card)

I would imagine that the credit card has high interest. Pay that off right away from your savings leaving you with 3800 savings.

What interest do you get for your savings vs what interest do pay on your loan?
I would guess that the interest on your savings is less than the interest on your loan. So in this case put the remaining 3800 savings against the loan.

This will leave you with 2000 to pay off the loan. There is not much point in keeping savings if the interest is less than what your loan costs.

naughtysmurf

jester77 wrote: »

So you have:

Savings: 5800
Debt: 7800 (5800 loan + 2000 credit card)

I would imagine that the credit card has high interest. Pay that off right away from your savings leaving you with 3800 savings.

What interest do you get for your savings vs what interest do pay on your loan?
I would guess that the interest on your savings is less than the interest on your loan. So in this case put the remaining 3800 savings against the loan.

This will leave you with 2000 to pay off the loan. There is not much point in keeping savings if the interest is less than what your loan costs.

If I'm reading that right, that would leave to OP with 2K debt and zero savings / shares, I doubt the CU would go for that as it would leave them exposed if the OP decided to stop making repayments on the 2k debt.

My advice to the OP would be to go in and talk to the CU, explain the situation and see what they say, they can be very flexible especially if the OP has been meeting all the repayments to date, there may be a difficulty because CU car loans are usually at a lower interest rate than general loans

For me anyway, I would not give up my savings / shares in this situation, never know when you may need it in the future

okiss

In this case I would take €2000 out of the savings in your credit union account if they allow you do do this. Tell them it is to pay off credit card debit.
I would then ring the credit card company and tell them that you may be in a position to pay off the credit card debit and ask them what will they accept from you.

With the €70 a week you are currently towards the credit union debit you could do the following:
1) Set up a standing order to pay the money into your saving account with the credit union
2) Look up the nca.ie website to see what bank is paying the best interest on regular saving account. If you save money this way in a 1 or 2 years time you could have a good amount of money saved. The credit unions are not paying a lot in interest at the moment.

chris85

okiss wrote: »

In this case I would take €2000 out of the savings in your credit union account if they allow you do do this. Tell them it is to pay off credit card debit.
I would then ring the credit card company and tell them that you may be in a position to pay off the credit card debit and ask them what will they accept from you.

With the €70 a week you are currently towards the credit union debit you could do the following:
1) Set up a standing order to pay the money into your saving account with the credit union
2) Look up the nca.ie website to see what bank is paying the best interest on regular saving account. If you save money this way in a 1 or 2 years time you could have a good amount of money saved. The credit unions are not paying a lot in interest at the moment.

DO not ask the CC company for a discount as on the ICB this may be noted as the account settled but for a lesser figure rather than you paying it off in full. Makes a difference to your credit rating.

Proxy

chris85 wrote: »

DO not ask the CC company for a discount as on the ICB this may be noted as the account settled but for a lesser figure rather than you paying it off in full. Makes a difference to your credit rating.

Are credit cards even listed on the ICB report? I got an ICB rating last year and no credit cards were listed even though I've had one for 8 years.

chris85

Proxy wrote: »

Are credit cards even listed on the ICB report? I got an ICB rating last year and no credit cards were listed even though I've had one for 8 years.

Yes they are.