Quest For Low Home Loans Leads To Local Credit Unions
The Age
Sunday July 31, 1994
LOW-INCOME earners in some Melbourne suburbs might want to consider their local credit unions in the quest for low cost loans.
Unlike banks, credit unions are owned by their members and work on a non-profit cooperative basis rather than seek profits for shareholders.
Greg Maloney, manager of Macaulay Credit Cooperative says that the cooperative is often wrongly perceived as being a welfare organisation.
In the case of this credit union, its 2750 members have access to a range of banking services, except for credit cards.
None the less, the credit union is involved in non-banking areas.
Macaulay is part of a $75,000 feasibility study to establish community-owned housing in the Macaulay and Melton regions.
The Commonwealth-funded project is for the development of community- owned and managed housing associations to provide housing for people on low or medium incomes.
Mr Maloney says such associations would acquire or build housing for people with low to moderate incomes, who are caught in either the Government housing or private rental trap.
The project was undertaken by the Federal Department of Housing and Local Government, the Shire of Melton, the Victorian Department of Planning and Housing, and the Macaulay Community Housing Development Association of which the credit union is a member.
Mr Maloney says the credit union took the initiative to bring together other local organisations to develop the initial proposal. He expects a draft of the study to be released this week.
In the meantime, members can take advantage of low-cost unsecured personal loans. However, the credit union's bond covers Ascot Vale, Flemington, Kensington, North and West Melbourne and Parkville. So, you have to live in these areas to become a member.
Mr Maloney says that the typical borrower is a supporting parent needing funds for a new fridge, beds or other furniture like tables and chairs.
For most people borrowing less than $1000, the choice is limited mostly to credit cards, a personal overdraft, an unsecured line of credit or unsecured personal loan that can cost a minimum of 12.5 per cent a year. And this does not take into account borrowers who might lack a loan track record acceptable to the lender.
Some Victorian lenders have $1000 as the minimum loan rather than their maximum.
Based on rates provided by Cannex, an unsecured loan of $1000 will cost you 12.95 per cent fixed from the Bank of Melbourne, 13.4 per cent variable from the Police Association Credit Cooperative and 12.95 per cent variable from VTU Credit Union. Most other lenders have minimums around $3000-$5000.
You cannot join Macaulay and then immediately apply for a loan.
Mr Maloney says that new members have to wait for four months before they will be considered. ``There are no exceptions," he says. During that time, members are expected to establish a savings pattern to prove that they have a capacity to pay.
Once new members meet these criteria they can borrow up to $950 at an eight per cent variable interest rate which has not changed for seven to eight years.
``In a few areas of this credit co-op, we're out of the market," says Mr Maloney, when explaining why the interest rate is not affected immediately or directly by short-term money market rates.
He says that sometimes a higher social return is preferable to a better financial one.
By taking the credit union option, a small loan can save a borrower a least $50 a year which can be used for another essential purchase.
© 1994 The Age
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