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Loan Policy

INTRODUCTION

The loan policy is applied equally to all members regardless of their qualifications. Black Star Line Co-operative Credit Union has an obligation to lend prudently and productively, and to protect members’ savings.  Maintaining a responsible balance between savings and loans is central to the Black Star Line Co-operative Credit Union’s philosophy.

Black Star Line Co-operative Credit Union Ltd will offer loans exclusively to credit union members and for a variety of purposes.  Black Star Line Cooperative Credit Union loans are very flexible; you can borrow small or large amounts and over different periods depending of your eligibility and within the limits of the Loans Policy.

Advantages of a Loan from Black Star Line Cooperative Credit Union

  • The interest rate is fixed for the duration of your loan, so if general interest rates change your repayments will not.
  • Interest is charged only on the outstanding balance.
  • There is no arrangement, set-up, or hidden fees.
  • There are no charges if you want to pay the loan off early.

 

Loans Committee

The Loan Committee are the individuals within the Black Star Line Co-operative Credit Union that administer the loans policy and procedures. The Loan Committee are all volunteers and are authorised by the Board of Directors to determine the loans policy, and authorising loan applications within the policy, subject to regulatory requirements and the Credit Union’s rules and regulations. 

There shall be regular meetings of the Loans Committee which shall be enabled by the Treasurer to view details of such account as is necessary in order to take decisions with sufficient information.

The Loans Committee shall be made up of 3 members.  All decisions shall be by simple majority vote.  The minimum number eligible to form a quorum shall be 2 and in this case all decision shall be unanimous.

The loans committee shall appoint from amongst their number a chairman and a secretary.  Minutes shall be kept of all business in a secure book designed for the purpose.

Loans meetings should take the following format:

  • Ascertainment of a quorum
  • The appointment of a chairman for the meeting (in the absence of the regular chairman)
  • The approval of the minutes of the previous meeting
  • Correspondence
  • A report of loans issued since the last meeting
  • Approval of new loan applications
  • Arrears report
  • Approval of arrears action
  • Recommendations

The Loans Committee should meet bi-weekly if possible but at least once monthly and the chairman should ensure that a report of their business is available for the next regular monthly meeting of directors.

The members of the Loans Committee should take great care even in very trying circumstances to keep the business of members using the credit facilities strictly confidential.

Policy and Procedures

1.         All members of the Black Star Line Co-operative Credit Union shall be eligible to apply for a loan from the Credit Union after they have completed 20 weeks or 5 months of regular saving.  A loan will not be given on the basis of a sudden increase in shares or savings.

2.         All loans are subject to the availability of funds and the number of shares and savings held by a member

3.         Members must be aged 18 or over to be granted a loan.

4.         A guarantor or collateral maybe required if recommended by the Loan Committee. A member must have saved on a regular basis over a 12 week period to be eligible to be a guarantor.

5.         The availability of loans and the ratio of loan to shareholding shall be adjusted from time to time to adequately make use of accumulated savings for the mutual benefit of all the members. The current ratio is 70 percent of the total asset of the union.

6.         All loans shall be applied for using the Black Star Line Co-operative Credit Union’s approved loans application form which shall be easily available to all members. 

7.         Loans must not be applied for to service a loan from another lending institution such as a bank or building society.

8.         Loans application forms should be fully completed, if necessary with the help of staff, a member of the loans committee or other competent member.

9.         Members should be made aware that their loan will be processed within 14 days in normal circumstances and, if approved, will be paid out during this duration.

10.       Loans shall be properly appraised by the loan committee. Appraisal criteria shall be based on:

  1. Capacity to repay
  2. Collateral (guarantor).
  3. Capital (amount available at the disposal of the credit union).
  4. The total monthly payment of members at any particular time ie loan repayment plus Interest on loans, contribution or savings shall not be more than 60% of the members monthly income.

11.       Loan Ceiling

The maximum amount of loan to be granted to a member shall be determined and reviewed from time to time by the management committee. No individual member shall borrow more than 20% of the society’s fund.

12.      Emergency Loan

Emergency loan will be considered to members. A member shall be entitled to up to 50% of Gross income to be repaid in not more than three (3) INSTALLMENTS through the pay roll deduction. Emergency loans will be considered for sudden hospitalization, death of a near relative, natural disaster, fire and robbery

13.       All loans will only be paid out by cheque with the relevant member collecting it IN PERSON and signing all required documents and the terms and conditions including limitations on withdrawals and late payments.

14a.   The member must be made aware of the repayment schedule and the rate of interest to be applied (e.g. 4% per 30-day month on reducing balance).

14b.    In accordance with the Loans Bond failure to make payment will attract a penalty of 1% per month for the current balance.

15.       Loans must be repaid regularly as promised on their application form and must be for the minimum amount stated. No prepayment payment.

16        Repayments of loan will be agreed to suit budget and individual circumstances and interest will be charged at 4% per month on reducing balance, with not more than 24 months per loan.

17        Whilst the loan is being repaid 75% of shares or savings must be kept in the member's main account. If the member's loan account falls into arrears the Black Star Line Co-operative Credit Union has the right to transfer shares or savings to the member’s loan account under the Bye Laws of the Black Star Line Cooperative Credit Union.

18.       When you sign your loan agreement, you are agreeing that the Black Star Line Co-operative Credit Union may hold your savings as security against your loan.

19        Therefore, savings withdrawals are not permitted from your Savings Account while you have a loan balance greater than your savings balance.  If your savings balance is greater than your outstanding loan balance, you can withdraw savings, but only up to an amount which leaves the savings and loan balances equal.

20        Loan applications that exceed member’s savings will not be accepted without one or all the following documents, which must be recent:

- 1 month bank statements

- 1 month wages slips

- 1 Utility bill

- In some cases proof of property ownership

 

21        A signed letter must accompany an application if it is presented by anyone other than the applicant.

22        All details on a loan form must be completed especially the health declaration.

23        We must point out that on pre-existing condition limitation the following rules apply:

  • Savings and loan insurance carry a 6-month pre-existing condition limitation, as standard.
  • Each new share deposit/loan agreement a member makes is governed by the 6-month pre-existing condition.
  • Benefit will not be paid on the members outstanding share/loan balance if death results from a pre-existing illness or injury for which medical advice, consultation or treatment was received within 6 months prior to taking a share deposit/loan. 

24        It is important that members continue to save whilst repaying a loan so a minimum amount of GHC10 per month or GHC 120 per annum must be saved each month whilst a loan repayment schedule is in place.

25        A loan shall not be made by the credit union to a member for a period exceeding two (2) years commencing on the date on which the loan is paid to the member.

26        Loan amounts are at the discretion of the Loans Committee; however, a first loan will be calculated at 100% of the member’s savings and depending on the members borrowing status subsequent loans may be increased.

27        If a member finds difficulty in repaying a loan, then he/she should immediately inform the loans committee so that mutually acceptable alternative arrangements can be made. “Courtesy, Care and Consideration” should work both ways, all information is treated in strictest confidence.

28        The loans committee shall ensure that a regular analysis is made of any loans of which the repayments are in arrears.  This analysis should be in depth with the aim of identifying at the earliest stage the formation of a “bad debt”.

29        The maximum amount that can be loaned legally is 3 times member’s savings, however no individual shall be allowed to borrow more than 20% of the total savings assets of the society. This will be subject to Terms and Conditions. A guarantor or collateral will be needed for all loans.

30        All loans are subject to Loan Protection Plan (LPP) which is a mandatory payment.  The amount is calculated and must be paid at the application stage when the applicant agrees and accepts the repayment schedule. LPP remittance must be sent to CUA by the 15th of the following month of loan approval.

31        Calculation of all loans will be calculated to be repaid monthly. 

32        The unsecured part of any loan shall not exceed 5% of the credit union’s total shareholding/assets.

33        Regular borrowers shall have a maximum loans/share ratio of 3/1. You cannot withdraw shares lower than this level (i.e. 3/1).

34        No officer or staff member of this credit union will, in any manner, discourage a member from applying for credit. This credit union will accept and consider an application from any member who wishes to submit a request for credit. Such requests must be in writing via the appropriate Credit Union loan application form. Solely verbal requests will not be honoured.

35        No credit will be extended to any person who has caused the credit union a loss or who has not voluntarily repaid the loss or who is not voluntarily repaying the loss, whether the loss was by bankruptcy or otherwise.

36        No credit will be extended to any person who does not comply with all requirements and qualifications of the Bye Laws and BSLCCU policies and procedures

37        Loans to Credit Union personnel, Board or Committee members will be underwritten in the same manner as that of the regular membership.

38        Loan Officers are prohibited from approving their own loan(s) or those of their next of kin.

39        The final decision on any loan application is at the discretion of the Loans Committee.

All loans may be subject to credit checks.

Types of Loans

The following types of loans are available to members:

  • Personal loans
  • House proud loan
  • Vehicle Secured loans
  • Farm Equipment
  • Land (acreage)
  • Business Loan *

 

Eligibility

A member must be over 18 years of age and have saved regularly for a period of 20 weeks or 5 months minimum prior to applying for a loan. Terms and Conditions apply. Each loan application is decided upon its own merits.

Loans to Office Bearers and Staff

All applications for loans from elected members and staff in excess of Deposits shall be considered by a joint committee. Elected members and staff loans shall be considered by the loans committee with the Treasury and board chair. The decision of the joint committee shall be the final. At least three members of the joint committee shall sign the application to endorse their decision approval or otherwise and state reasons.

Interest

The interest charged on Standard Loans is 4% per month on the reducing balance of loan.

Business loans should attract 7 % plus GHC200 processing fees and a minimum of two shares. And a collateral or guarantor. Applicant will be responsible valuation cost associated with their properties.  Collaterals may include the assets of the individual’s business vehicle, land or house, which must be validated by the right authorities to ascertain its value for the loan. Duration of business loans shall not be more than 12 months (1 year), from the date of disbursement of funds.

 

Applications

All applications for loans must be made on our approved loan application form. All loans are presented to the Loans Committee for a decision, subject to funds being available. 

  1. All loan application forms shall be lodged with the manager who shall process them before passing them to the loan committee.
  2. Loan applications can be process in an ongoing bases, with a 14 business working days turn around.
  3. Loan applications shall be considered in the order in which they are received. Where there are many more applications than funds available, preference shall be given to smaller loans.
  4. Where amounts applied for are approximately the same, preference will be given for loans for shorter periods.
  5. Further to these provisions, priority shall be given to:
  1. Members who have never had loans.
  2. New members who have qualified for loans.
  3. Members who have finished paying their first loans and have re-applied for fresh loans

Amount

Member’s first loan will be calculated at 100% of savings, subsequent loans could be a multiple of their savings to a maximum of 3 times members saving. A loan shall not be made by the credit union to a member for a period exceeding two (2) years commencing on the date on which the loan is paid to the member.

Members must continue to save while repaying a loan.

Subsequent Loans

Members should repay previous loans through regular payments before applying for another loan. However, the Credit Union recognises that on some occasions it may be necessary to borrow again before an existing loan is paid off in full. On these occasions your existing loan will be refinanced and a new loan granted for the increased amount. The maximum total amount you can borrow is three times your savings balance at the time of application, which includes the outstanding balance of your existing loan subject to Terms and Conditions.

Security for Loans

  1. All loan balances in excess of the borrowers’ share/savings must be secured by a guarantor/collateral. The total share/ savings of the borrower and the guarantor must be equal, or more than the loan applied for. The guarantor shall be a member of the credit union.
  2. “No borrower or co-maker shall be allowed to withdraw his/her savings which serves as assigned security for an outstanding loan.
  3. “No member of the credit union shall stand as guarantor for a second loan while a former one remains unpaid.
  4. “No member of the Board, Loans or Supervisory Committee is permitted to co-sign.

 

 

 

 

ADMINISTRATION PROCEDURES AND PROCESSES

 

  1. Check the eligibility of applicants. 

 

  1. Complete the Information Gathering Form
  2. Is the applicant a shareholder?
  3. Has the applicant have enough savings to match the loan request
  4. Is the member a regular saver?
  5. Is the member working
  6. Does the member assessed to be able to pay for the loan?
  7. Repayment of loans every month

If all the above is satisfactory, continue

 

  1. Complete Loan Policy Cover Application (Health Declaration) Form and signed by applicant

 

  1. Completion of loan application form, signed by applicant

 

  1. Calculate loan schedule including LPP (LPP is excluded from Group membership loan application), if repayment schedule is acceptable to the applicant make two copies, one for applicant and one attached to Loans Application Form

 

  1. Collect LPP from applicant

 

  1. Attach the, Information Gathering Form, Loans Application Form and Loan Schedule and forward to the Loans Committee for assessment and approval

 

  1. On approval of loan by Loans Committee, the treasury will be notified. The treasury will document and authorise payment to applicant via cheque duly signed by two of the board Chair and Secretary.

 

  1. Activate a Loans Ledger document for the applicant

 

  1. Give copies of all documents to the applicant before handing over the cheque.

 

  1. Formulate a monthly report for the Manager of loans to-date

 

  1. Number of loans
  2. Number of new and existing loans
  3. Current outstanding balance of loans
  4. Total amount of loan payments received this month
  5. Payment delinquency and who it relates to, and state action taken

 

  1. Complete CUA Risk Management Programme remittance advice letter

 

  1. Complete LPP Remittance Form

 

  1. Forms referred to at no. 10 and 11 together with payment for LPP for all loans during the month must be sent to CUA by latest 15th of the month

 

  1. Copies of these documents must be filed in BSL filing system for end of year audit and for future reference, and a soft copy sent to the Manager.

IN COMPLETE APPLICATION FORMS WILL DELY THE PROCESSING. STAFFS MUST COMPLETE THE FORMS BEFORE FORWARDING TO THE LOANS COMMITTEE.

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