Third-level loans much cheaper at credit unions than banks

CREDIT unions have emerged as being significantly cheaper for education loans than banks and building societies.

An Irish Independent survey of credit unions across Ireland has found that the average interest rate for a credit union education loan is less than 6pc.

This compares with student loan rates averaging 9.6pc from the leading banks.

Thousands of students are either returning to college or going to college for the first time. Many of these are taking out loans to fund their third-level studies.

The credit unions were asked to quote the interest rate they charge for a loan of €3,000 over three years.

Some 30 credit unions were surveyed in conjunction with the Irish League of Credit Unions.

The highest rate charged for a student/education loan was by Letterkenny Credit Union in Donegal with a rate of 7.95pc. At the other end of the scale, Rathmore and District Credit Union, in Co Kerry, charges just 4pc.

The average charged by the 30 credit unions came in at 5.95pc. These rates were before an interest rebate was applied - something that could bring the interest rate down further.

Lending

Information provided by the National Consumer Agency, a state body that has taken over the consumer information function of the Financial Regulator, shows that bank lending rates for student loans are higher.

AIB charges 9.79pc for a loan of between €2,500 and €5,000, with up to five years allowed to repay the money.

Bank of Ireland charges 11.9pc for a similar-sized loan, with a repayment period of between one and five years.

Ulster Bank was the only other lender to quote for a student loan of this amount of money and it charges 7pc, allowing five years for the money to be paid back.

The Union of Students in Ireland (USI) has reported that students are facing a struggle to secure even small loans from banks.

USI president Gary Redmond said: 'A lot of students have to get their parents to go guarantor for them but the difficulty is a lot of parents have seen their wages fall or are now unemployed,' he said.

Chief executive of the Irish League of Credit Unions Kieron Brennan said credit unions were seeing a surge in demand for loans from students.

'Unlike other financial institutions, credit unions are still providing loans and are still offering credit to our members day in, day out,' he said.

- Charlie Weston Personal Finance Editor

Irish Independent