Members of the Credit union who are of full age – 18 years – may apply for a loan for a provident or productive purpose. All loans are provided from the savings of other members.
Loan application may be made on a Friday night between 7 – 8.30pm. A decision on the application will usually be available on the following day. Regular borrowers with a good record may complete the form in the office during working hours. This will be presented to the committee on the following Friday night.
The legal maximum for loans is £15,000 above a member’s savings. This limit applies to all members of the Credit Union. (This does not mean that a member can demand a maximum loan). Dromore Credit Union’s loan policy allows members to borrow up to the amount of their savings at any time. Members loans are covered by shares. Members should ensure that repayments are maintained regularly otherwise arrears will occur which may affect the granting of later loans.
A member will normally be expected to establish a regular pattern of savings before applying for a loan. Members with small savings cannot expect to receive large loans. As a rough guide, a member should have saved one third to one fifth of the amount they wish to borrow. (This does not mean a member can demand a loan of five times their savings).
The following are some of the factors taken into account when considering a loan application
- A regular pattern of savings
- The member’s previous loan repayment record
- The purpose of the loan
- The member’s ability to repay as agreed
- Frequency of loan applications
Every loan application receives careful consideration and most loans are granted. However, in the best interests of the Credit Union and indeed of the member concerned, some loans are refused.
It should also be noted that loan applications are considered by the loans committee and counter staff are not involved in such decisions.
While the present legal term for loan repayment is five years, there are certain loans which are regarded as annual loans, eg. Holidays, Christmas, Car Tax, Insurance, Rates etc. Such loans are should be fully paid within 12 months.
How do I apply for a loan?
You must have the ability to repay a loan. Proof of income and current address may be required. Complete an application form in person with Credit Union staff or committee member. The Credit Committee meets weekly to consider loan applications. Staff should be contacted if a member has any queries regarding applying for a loan. The Credit Union exists to accommodate the needs of its members but at the same time not to get them into financial difficulties.
What is the rate of interest on loans?
By law, a Credit Union cannot charge more than 1% per month on the reducing balance of a loan. The Credit Union endeavours to give a rebate on loan interest paid which depends on the annual surplus available in each financial year, therefore loans may cost less then 12.68% APR, the past five years the interest has been 35% which calculates at 8.24%. Credit Unions do not charge fees or transaction charges. Since interest is charged only on the outstanding balance of the loan, you will pay less interest if you repay your loan in a shorter time than planned.Thus the Credit Union gives you control over your finances even when you are a borrower.
Before any loan is paid out, the member and where applicable, the guarantor, is required to sign a PROMISSORY NOTE. This is a legal document whereby the member – and the guarantor – promise to repay the loan and interest at a stated rate of repayment.
Where the amount of shares/savings at the time a loan is approved are equal to or less than the loan amount, those shares /savings become pledged as security for the loan and may not be withdrawn. It is the policy of Dromore Credit Union that any money saved after the loan is granted may be withdrawn if the loan is not in arrears.
There may be times when, for genuine reasons or unexpected circumstances, a member finds difficulty in maintaining the promised repayments. If this happens it is essential that the member contacts the office immediately. Any delay will make the situation worse and it will become harder to make a new repayment arrangement. Our Credit Control Officers are always available to discuss loan account problems
Other Loan Services
A member can protect their loan by choosing Loan Protection when they apply for a loan.
The credit union also provides at no extra cost Loan Protection Insurance cover for eligible members. To be eligible for this insurance, a member must be actively at work or in good health on the date the loan is granted. Again a Declaration of Health form may be required. Loan Protection Insurance cover ceases at age 80.
Money Management and Borrowing Guide
- You must be 18 years of age and a credit union member
- You will have to fully complete a Loan Application form
- The form will request full details of Income and Expenditure
- As a backup you may need copies of pay slips, recent bank statements and/or credit card details
- If you are a young person requesting your first loan you may need a suitable adult as a guarantor
- Sometimes information will need to be checked with outside agencies – your permission is necessary
- The Lending Committee can’t give approval until they are satisfied you can keep the agreement made.
- Small routine loans to long-term members with excellent records or loans secured by shares will be dealt with routinely
- Larger loans, first-time applications, or borrowers who have had difficulties in the past will take a little longer but all applications will be dealt with as quickly as possible
Our aim is to cater for all members’ needs and to prevent, if possible, over-borrowing and getting caught in the modern ‘debt trap’, it is also highly important that we act, and are seen to act, as responsible lenders. Finally ALL loans must be repaid
Borrowing money in the boom times was very easy. But what about now, in the midst of a recession when we are more likely to be borrowing out of necessity rather than indulgence? With many high street banks tightening their belts, getting affordable credit is becoming increasingly difficult. Unlike other financial institutions credit unions are welcoming new members everyday.
A credit union has some very special features:
- Loans are insured at no direct cost
- There are no hidden fees or transaction charges
- Interest rates are capped at no more than 1 per cent per month
- Repayments are calculated on the reducing balance of the loan. This means smaller interest repayments as you repay your loan
- Repayment terms to suit your particular circumstances
- You can repay the loan early with no penalty
- Additional lump sum repayments and larger repayments are accepted with no penalty
Members are encouraged to add to their savings with each loan repayment, so that they can increase dividends and have added security
Throughout the ongoing crisis the credit union remains ready and willing to serve members needs, while offering security for savings, death benefit insurance, loan protection and life savings insurance.
So, whatever you’re borrowing for – a car, home improvements, a holiday, a special event – check out your local credit union for a fair deal. Remember to borrow you must be a member.
Everyone needs financial support now and again and in the capable hands of your credit union, you will find the help you need.
Golden rules of borrowing
- look at the total amount you’ll repay-not just the APR-before deciding with whom to borrow
- work out how much you can afford to repay each month
- look out for excessive charges to set up a loan, make additional repayments or repay early
- read the small print if you’re taking Repayment Protection Insurance and make sure you understand exactly what cover it gives you.