Credit Union Loan - 10.7%

mirwillbeback

Hi all,

My sister asked me to look at a few things financially with her to try improve her finances.

I knew she had a loan with the Credit Union but didn't realise how much.

She told me she has 15,000 in savings offset against a 42,000 loan, which was a previous loan that was down to 24,000 but increased to buy a car, all of which she can afford and is in no arrears.

However, the rate on the loan of 10.7% seems very high to me - I checked their website and they advertise car loans at 7.9%, and a within shares loan of 6.5%

I understand she would have signed a loan agreement at the beginning which is no doubt legally binding, but would anyone with knowledge on here think she is being charged too high a rate.

Also have to say that I always thought the CUs were the cheapest to borrow from but that doesn't seem to be the case here!

Any advice is really appreciated.

Spocker

For a loan within shares rate the full amount of the loan would need to be covered by shares.

When your sister got the top-up loan to buy the card, is the top up amount treated at the car loan rate of 7.9%. You'll need to inspect the most recent loan agreement first, to get a handle on the numbers

mirwillbeback

Spocker wrote: »

For a loan within shares rate the full amount of the loan would need to be covered by shares.

When your sister got the top-up loan to buy the card, is the top up amount treated at the car loan rate of 7.9%. You'll need to inspect the most recent loan agreement first, to get a handle on the numbers

Cheers, thanks for that.

Fol20

I never understood why people get a loan yet still have savings that cannot be used as its collator for a loan. I would pay off 15k off your loan tomorrow. If its a 5 year loan, this equates to a saving of 8k straight away. When you compound the amount you save and pay this off your loan, you will be able to pay it off quicker.

Its a never ending cycle if you get into debt like that. I might be old fashioned when i say this but the only debt people should ever have is for a house. If you cant afford a new car, buy a second hand car you can afford until you have enough money saved for the car you want.

cefh17

Fol20 wrote: »

I never understood why people get a loan yet still have savings that cannot be used as its collator for a loan. I would pay off 15k off your loan tomorrow. If its a 5 year loan, this equates to a saving of 8k straight away. When you compound the amount you save and pay this off your loan, you will be able to pay it off quicker.

Its a never ending cycle if you get into debt like that. I might be old fashioned when i say this but the only debt people should ever have is for a house. If you cant afford a new car, buy a second hand car you can afford until you have enough money saved for the car you want.

I agree with you there but I'd keep a few grand for unexpected emergencies and not completely decimate the savings. But keeping 15 and having nearly 3x that amount outstanding is sillly

Fol20

cefh17 wrote: »

I agree with you there but I'd keep a few grand for unexpected emergencies and not completely decimate the savings. But keeping 15 and having nearly 3x that amount outstanding is sillly

I thoughtvwith the credit union they do not allow money to be taken out when you have debt? With others it makes sense however with them i dont see the point if having savings especially that level of savings with you have loans of that rate

Avatar MIA

Correct, they will only allow the €15k to be offset when the loan amount is down to €15k.

Credit Unions are cheaper than loan sharks (considerably so) but generally more expensive than other financial institutions.

cefh17

Fol20 wrote: »

I thoughtvwith the credit union they do not allow money to be taken out when you have debt? With others it makes sense however with them i dont see the point if having savings especially that level of savings with you have loans of that rate

Oh I've no idea their rules sorry, just a general comment that emergency funds are a good idea