No gimmick car loans from your local credit union
In the current climate, it can be difficult to get credit for the things in life we need – that is why the credit union is on hand to help.
Unlike many car finance deals available today, which are actually Hire Purchase Agreements, arranging your car loan through your local credit union means that you own the car from the outset. Nor are there any balloon payments, admin charges or hidden fees with a credit union car loan. A car loan with your local credit union is just that - a loan, no gimmicks and fully transparent.
Differences: Hire Purchase v Personal Loan
The main difference between using a personal loan and a hire purchase agreement to buy a car is that with a credit union personal car loan you borrow money, pay for your car, and own it immediately.
When you use a hire purchase agreement to buy a car, the motor dealer sells the car to the finance company. The finance company then rents the car to you for an agreed period of time in return for a set monthly repayment over a number of years. During the Hire Purchase Agreement, you can use the car but the finance company actually owns it. They are the owner, and you are the hirer. At the end of the agreement, the finance company passes ownership of the car to you, provided you have made all the repayments. You don’t own the car until you make the last repayment. This means you cannot sell the car if you run into problems making your repayments.
Try not to be influenced by repayments that seem low - look at the total hire purchase price as this is what you must pay to own the car. And don't choose long, fixed-repayment agreements if you can get a more flexible personal loan elsewhere, like your local credit union. Compare the total amount of interest and costs you have to pay back and make sure to include any additional charges when comparing the cost of the credit union personal car loan with the cost of a hire purchase agreement.
The fees and charges on hire purchase agreements vary, but may include:
- Documentation fees - This is a fee for setting up the agreement.
- Interest surcharge for missed repayments - this means an additional amount of interest will be charged on the amount unpaid
- Penalty fees for missed or late payments - This is charged for missed or late payments, in addition to the interest surcharge.
- Completion fee for ownership of the goods to pass to you. This is a fee charged to end the agreement and to allow ownership of the goods to pass to you.
- Repossession charge - If the finance company repossesses the goods, you will be charged a fee.
- Rescheduling charge - If your lender agrees to change the terms of the agreement, you may be charged extra.
With some hire purchase agreements, the monthly payments are not evenly spread out and you may pay less in the earlier months of the agreement. This may result in a large final payment at the end of the term, known as a balloon payment.
Any balloon payment charged on a hire purchase loan - while it is not an extra charge - has the effect of postponing part of the costs until after the loan. This can make your monthly repayments appear more affordable. The amount of your final repayment is very important because: a large final payment could be more than the value of the car at the end of the agreement and you will have to have that money available to pay at the end of the agreement if you want to own the car or you could end up in a new hire-purchase agreement if you cannot afford to pay it off - the larger the final payment, the longer it takes to pay half the hire purchase price.
In some cases you may also have to pay a minimum deposit therefore not getting the full purchase price of the car.
It is worthwhile checking the registration documents of a second hand car to make sure that it is not already owned by a finance company, in which case the person trying to sell you the car does not actually own it and therefore does not have the right to sell it to you.
Consumers who would like independent information or help in understanding any of the terms and conditions of their hire purchase (or any other loan) contract should contact the National Consumer Agency. You can contact their consumer help-line on lo-call 1890 432 432 or visit their website.
For more information on Hire Purchase Agreements and their charges please go to consumerhelp.ie
Credit Union Car Loans
- Unlike a Hire Purchase Agreement you own the car from the outset.
- You can sell the car on at any time.
- You can borrow for the full amount
- There are no hidden fees, admin charges, transaction charges, set up costs or balloon payments.
- The interest you pay on a credit union loan is the full cost of the loan so it is fully transparent.
- Credit union interest rates are fair and reasonable and capped by law.
- Repayments are calculated on your reducing balance, so you pay less interest with each repayment.
- Your credit union loan is insured in the event of your death - subject to terms and conditions - at no direct cost to you. Other lenders charge for this.
- You can pay off your loan early, make additional lump sum repayments or increase your regular repayments, without a penalty. Other lenders may charge you extra for paying them back faster!
How much does a credit union car loan cost?
Your local credit union can give you details of current interest rates. Click here to find your local credit union.
How do I apply for a car loan?
To begin, with you have to be a member of a credit union. You'll find your local credit union on the CU Locator.
For members, it's as simple as visiting your credit union and discussing your needs. They will give you an application form to fill out.
If you’re not already a member, call into your local credit union for more details on how to apply for membership.
Your credit union encourages you to manage your money carefully by structuring loans around your needs and your ability to repay. So, whatever you’re borrowing for — a car, home improvements, a special occasion, holiday, school or college fees — your place will give you a fair deal.
Please Note: Loans are subject to approval. Terms and conditions apply.
If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating.