Beware of Credit Unions, overcharging...

[nathal]

A few years back, due to bad credit etc, i needed some money, so someone recommended my credit union.

Had £2000 saved with them.

Offered me a loan of 3 x savings @ 1%interest month.

ok took it.

BUT LOOK AT IT LIKE THIS:

I borrowed £6000 @ 1% per month £60/month £720/annually interest.
At a stage i asked to take out some of my savings. Was not allowed.

As i see it, i only really borrowed £4000 as i was unable to touch my savings. During this i receive no interest on my savings.

In effect the £4000 i borrowed was @ 1.5% month (approx 20% interest)

A total rip-off, does anyone agree??

[Rooster-UK]

Hi Nathal.

Perhaps it's me but your figures seem to be awry.

Had £2000 saved with them.

Offered me a loan of 3 x savings @ 1%interest month.

So they lent you 3 x savings which is £6000 which allows you the use of £6000, leaving your savings of £2000 intact.

As i see it, i only really borrowed £4000 as i was unable to touch my savings. During this i receive no interest on my savings.

If you borrowed£4000 then that is only 2 x savings.

I am confused.

Regards, Rooster.

[nathal]

They allow you to borrow, 3 times your savings, but they keep your savings and don't let you touch them. They sorta use it as security.

But the thing is, if you need £6000 in total, to say buy a car:
You save £2000 so you would think you only need to borrow the other £4000.
Not with the credit union, as they keep the £2000 as security so you actually borrow £6000, and pay interest on the £6000

[nathal]

Think about it like this:

You have a bank account with an overdraft:
Say overdraft 12% interest. £4000 limit.

You have £2000 saved in account. You max out your overdraft, therefore paying interest on the £4000.
The bank is not holding your £2000, whereas the credit union do.

Your indebt to the sum of £4000
But with credit union £6000 whilst paying interest on total sum.

Fair enogh you may have £2000 saving, but as you recieve no interest, see how much the actual cost is..