A few weeks ago, a credit union member enquired about a loan balance. This is the exact balance outstanding on a loan on a particular day.
It was a simple request. But the actions behind it were anything but.
Apologising for ‘leaving’ the credit union, the member was looking to borrow in excess of the 3-times what they had in their savings account with the credit union. Because they had incorrectly assumed that they could not borrow in excess of the 3-times amount, they felt their only option was to go elsewhere in order to be able to borrow.
Normally, a balance request is processed quickly at the credit union. The focus always is to provide a fast and efficient service.
So, when this member presented at the Dublin branch of St. Joseph’s Irish Airports & Aviation Credit Union, it was a chance to catch up and also, to discuss their request.
The good news was the member had a great personal credit history.
But more important, they also had a very strong income. Both are key factors in lending and in fact, they override the 3-times savings rule (unless a member is availing of a ‘secured loan’).
“This can be a common misunderstanding of credit unions make lending decisions” said St. Joe’s CEO, Ms. Edel Bourke.
“Members wrongly assume that if they have €1,000 in savings, the maximum loan they would qualify for is €3,000. This is incorrect. In fact, we have approved loans of €10,000 or more where members may have savings of €1,200 or even less” according to Ms. Bourke.
Credit Unions must assess loan applications on the ‘repayment capacity’ of borrowers, not how much they have in their savings accounts. This is a real true measure of their ability to afford the loan. In fact, the total ‘repayment capacity’ of all borrowers is a growing focus of financial authorities in Ireland.
In 2018, the new Central Credit Register will become the main point of reference for all creditors in Ireland as they assess loan applicant’s ability to repay. Even those applying to credit unions must follow the new rules.
But back to the credit union member that requested a loan payoff amount. In their case, they were approved for a new loan and at a rate of interest that was far lower than they were being quoted elsewhere.
If you have a loan question, why not talk to a member of the staff here at St. Joseph’s Irish Airports & Aviation Credit Union. We are here to serve your needs and promise to get back to you quickly with a response.
Don’t lose out on a great loan deal simply because of an old lending myth!