A loan could be refused for a number of reasons, here are the main ones:
1. Ability to repay.
The money we lend belongs to all the members of the Credit Union. It is our responsibility to all members to ensure that we only lend members’ money to other members when it has been established that there is an ability to repay the loan. A borrower must be able to afford the loan repayments, including interest, over the full duration of a loan, therefore if income is not secure enough that may be a reason to refuse the loan.
We also need to be sure that we are lending responsibly and not knowingly facilitate a member becoming over indebted. If a loan applicant does not have enough income to repay the loan, the loan will be refused. We will assess the circumstances and loan requirement in coming to a decision regarding repayment capacity.
2. Poor Credit History.
Part of the loan assessment process is that we check ICB (Irish Credit Bureau) and the CCR (Central Credit Register) for an applicant’s previous loan repayment history. If the report shows a poor credit history; that an applicant has not been paying back other loans in the past, that is taken as a potential indicator of whether they will repay the loan to the Credit Union and the loan may be refused because the risk is too high that they will not pay back the loan to us.
3. Loan purpose not viable.
In the case of a business or other personal loan, an assessment of the loan requirement, business plan, projections and business model is undertaken. A loan may be refused if the assessment concludes that the rationale for the loan or the business is not viable in the long term and therefore lending would be too risky.
4. Non payment of a previous loan.
When a loan is taken out, a credit agreement is signed. This is a legal document committing a member to repaying the loan with interest. If a member’s financial circumstances change & they can’t pay the original repayment installments, we can work out a new repayment plan.
However, if a member won’t work on a new repayment plan and refuses to pay back a loan or stick to a new repayment agreement, that person will lose their Credit Union membership and all benefits associated with membership; including future borrowing until the original loan & outstanding interest is paid back in full.
A member has the right to appeal the loan decision, provided they can bring proven additional new information on income or circumstances above and beyond the details submitted at the time of application.