Loans Policy | Loans Policy |
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GENERAL POLICY FOR LOANS
It shall be the policy of the National Co-operative Credit Union (NCCU) Limited, in accordance with Section 121 of the Co-operative Societies Act No. 2 of 2011, to grant loans for provident and productive purposes to eligible members of the NCCU and to other registered societies. Character, Capacity to Repay, and Securities offered will be the major considerations in granting loans to members and registered Co-operative Societies.
In evaluating applications for loans, the credit-worthiness of each applicant shall be analysed and the following factors, among others, may be considered: Applicant shall be analyzed on the following factors I. The member must be 18 years or older. II. The member must have a source of legal income. III. The member's record of savings and past loan repayment history. IV. Ability to repay the loan being requested. V. Types and value of securities offered. VI. Credit reports and statements of account from other financial service providers. VII. The member must not be delinquent. Credit Committee The Credit Committee has the responsibility for approving loans in keeping with the Credit Union's Loans Policy. It's rules and statues are subject to restrictions set forth by the Board of Directors from time to time.
POLICY GUIDELINES FOR LOANS Minimum Savings Requirement Resident members should have as Security Savings in the Society a minimum of 5% of the total amount of loan requested. Where a member has insufficient funds in Security Savings but holds other available deposits with NCCU (Fixed deposits, MRA, Ordinary Deposits & Special Savings), he/she shall pledge these deposits to make up the minimum requirement. Members applying for vehicle and business loans must have a minimum of 10% of the total loan request in Security Savings with the Society. If the member does not have sufficient funds at NCCU or other financial institutions to meet the minimum savings requirement, he/she can make up the deficit by increasing compulsory savings. This Policy does not apply to non-resident members applying for loans. Where the minimum savings requirement is being met by increasing compulsory savings, the period should not exceed the loan term but in any event should not be longer than ten (10) years. Non-resident members must have a minimum of 15% of the loan request in Security Savings with the Society. Debt/Income Ratio Members applying for a loan must not have fixed monthly debt exceeding 60% percent of total gross income. Fixed monthly debt includes rent, all loan installments, credit card and hire purchase payments, insurance premiums and any other debt that cannot be avoided. Each case can however be reviewed on its own merit and a decision taken. Loan Protection Coverage Members taking loans must undergo a comprehensive medical examination by an approved medical doctor to participate in the NCCU Loan Protection Coverage Plan. The examination is required where: I. The loan is $77,000 and over. II. The member is 50 years and over and the loan request exceeds $27,000. III. The Society, in its judgment, deems it necessary. NCCU will provide a letter granting or denying coverage on receiving the medical examiner's report. The member can opt to waive his rights to coverage by signing a waiver of coverage. Security for Loans NCCU loans must be secured. Click here for the items accepted by the Credit Union as security on loans. Loans to Purchase Real Estate Overseas The NCCU will consider granting loans to members to purchase real estate overseas. Locally owned and registered properties must be provided as collateral. The valuation report should be dated within 6 months of the application. These conditions will not apply to Cash-secured loans. Real Estate Accepted as Security The value of real estate accepted from members as security will be at a maximum of 80% of the market value of house & land and 75% for land only. Period of Loans Each loan category has a specific repayment period. Periods range from 3 months for Pay Day Loans to 30 years for Mortgage Loans. Unsecured (Character) Loans “Character” is considered the most important criteria for any loan. Of major importance, are the member's paying habits and previous credit record with NCCU. A maximum of $10,000 above member's cash Savings/Deposits, inclusive of a Quick Cash, Now for Now/any other unsecured loan facility, will be granted as a regular Character Loan. All that is needed is the member's signature and good character. The Learn While You Earn is a special Character Loan for which a maximum of $20,000 above Savings (inclusive of other Character Loans) will be granted. Share Capital Requirement The share ownership by members should be based on their borrowing from the Society as follows: i. Members requesting loans of up to $10,000 must have at least two (2) shares. ii. Loans from $10,001 - $50,000 four (4) shares. iii. Loans from $50,001 - $100,000 six (6) shares. iv. Loans above $100,001, six shares and one (1) additional share for multiples of $50,000 thereafter. Cash-Secured Loans Members can receive Cash secured Loans of any amount that he/she would be entitled to withdraw as savings. The interest rate on these loans is normally 1% below the rate stipulated for this loan category with the exception of Mortgages and Overdrafts. Repayment Schedule All loans have a stipulated repayment period and must be related to the borrower's income and ability to pay. Extended loan repayment periods With the exception of mortgages, land and education extended loan repayment periods can be granted up to a maximum of 96 months. In special circumstances the Chief Executive Officer (CEO) and the Board of Directors (BOD) may approve a repayment period longer than 96 months. Assignment of Wages/Salary Where possible, loan repayment should be arranged through the assignment of wages or salary. This is not regarded as security but as a collection measure. Legal and Medical Costs All legal fees and medical costs related to the granting of a loan are to be met by the member, but may be added to the loan amount. Compulsory Savings To assist members in saving and improving their financial condition, member borrowers will be required to contribute at least 5% of the loan installment towards their savings. This does not apply to cash-secured loans. Members will be encouraged however to grow savings using this method. Promissory Note The Promissory Note must be completed, signed and witnessed prior to the disbursement of funds. Implications of the Note shall be explained to the member/borrower prior to signing. Loan Approval Levels for Management Loan approval levels are as follows:-
Difficulties with Repayment Should a member experience difficulty in meeting loan repayments, the Credit Union should be advised without delay. Penalty for Closing of Loans A fee of three (3) month's interest will be applied to balances of all loans closed before the due date through a take-over by another financial institution. Interest Rate The Board of Directors determines the rates of interest on all loans. The Board may review the rate of interest from time to time. Present interest rates range from 6.5% on a Mortgage to 12% on an Overdraft Facility and Hire Purchase and Credit Card Loan Consolidations. Member Loan Limit In no case will the amount loaned to a single member exceed one percent (1%) of the share capital and surplus of the Society. Limited Funds When the funds of the society are limited, the Board of Directors may reduce the maximum loan limit and/or shorten the period of repayment. Confidentiality of Transactions All transactions with members of the Society shall be kept confidential. |
