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Car loans top list as huge numbers of consumers plan to borrow from their credit union

Huge numbers of people say they plan to borrow from their credit union this year, is what is set to be a major boost for the lenders.

They mostly want the money to buy cars, with mortgages, holidays and third-level education also featuring as reasons for borrowing.

Consumers plan to borrow an average of €8,558, according to the research carried out for the Irish League of Credit Unions by i-Reach.

Most of the 1,000 people surveyed said they intend to get their loan from their credit union.

This is positive for the credit unions which are struggling to get people to take out loans from them.

Across the sector just €4.5bn is lent out to members, despite the movement having assets of €17.2bn. This means the loan to asset ratio is just 27pc, when it was traditionally 50pc.

Assets of a credit union include its investments, loan book and its buildings.

The survey indicates that more than a third of borrowers plan to take out a car loan, a traditional strength of the movement.

There has been a huge upsurge in people importing cars from the North and England due to the weakness of sterling against the euro. Many of these purchases are being funded by credit unions.

The i-Reach survey found that just over a quarter of respondents plan to take out a mortgage. However, many of those are not expected to use credit unions as they are only beginning to offer home loans on a more formalised basis.

Smaller numbers plan to borrow money this year to get married.

Three quarters of borrowers plan on getting their loan from the credit union, according to the Irish League of Credit Unions-funded research.

Banks came in second as the lender of choice at just 17pc.

Family or friends are the go-to lenders for 5pc of borrowers, while 1pc said they would borrow from a moneylender.

Borrowers will take out an average loan of €8,558. Many plan to borrow between €1,000 and €5,000, but the average is skewed upwards by the fact that one in ten plans to borrow much larger amounts for the likes of a mortgage.

Most plan on paying the money back over three to five years.

The affordability of monthly loan repayments stands out as the deciding factor in people’s choice of lender, which may point to a lack of awareness of the true cost of the loan.

Head of marketing and communications in the league Paul Bailey said it was reassuring that consumers are taking a prudent approach to borrowing this year.

“What is of concern is that there appears to be a lack of understanding among borrowers of how much the loan is actually costing them,” he said.

He said the survey shows that borrowers tend to focus on monthly repayments, rather than on the cost of credit, which is the total amount they will end up paying back to the lender.

Article Source: http://tinyurl.com/kbwqb42

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