Conference 7.286::dcu

    I got a letter stating the interest on my car loan was going
    up to 11 %.   Sounds like you got a better deal!!
    
    This was my first DCU car loan.  It will be my last.

    
    Yup - mine went up 3/4% to 10 3/4%.
    
    I was furious.  Interest rates are plummetting everywehre.  It seems
    like DCU decided that because they can raise it, they will.
    
    The price I pay for buying a foreign car and not getting the plethora
    of "2.9% financing" deals that are available on American cars.
    
SEAN/BEER=LABATTS

Mine is going up to 12%.... The only good news is that I just refinanced
my car loan with a local lender who was eager to get my business and got
the balance financed at 8.5%. 

- Jeff

    	Mine's going up 3/4% to 11%. I guess the only thing consistent
    	about DCU is its inconsistency.
    
    	I'm really looking forward to DCU's explanation of why their
    	rates are running contrary to the industry. Do they know
    	something the Wizards of Wall Street don't.

Mine's going up 1% to 10.75%. this is the second time it's gone up. I'm going
to look for a place that will refinance at a lower rate and this will most
definitely be my last ever DCU loan. I also plan to move my savings out
and eventually my checking. 

Jenna

       Anyone called and asked them why? They usually don't answer
    questions like that in here.
                                        Denny

    Stand by Denny, I'm working on it.  
    
    After working my way through DCU's formidable voice mail gauntlet 
    I finally found out the person who signed my letter (Claire M. 
    Beaudoin, director of lending) was out until August 9.  

    So I spoke with a Lisa Kendell, who wouldn't touch my "Why are the
    rates going up?!!" question/complaint.  She pointed me to Patty
    DiAtico, who's in communications (PR?).  She's at a meeting and
    supposedly will be returning my call in 1 hour.
    
    We'll see.  It takes alot to get me steamed, but this is ridiculous.
    They're trying to stiff me at 10.75% and I, for one, will be finding
    another bank for a loan.  But I do want to here the explanation.
    
    - Chris
    

How is it that DCU's auto loans are adjustable?  I've never heard of such a
thing.  But then again, I wouldn't be caught dead getting a loan from a bank for
a car. 

Jim.

    Well I just got off the phone with Patti.  Basically she told me
    that the increase was the result of an adjustment to DCU's loan
    portfolio.  They needed to bring the outstanding loans in to meet
    the current car loan of 11%.  Believe it or not, she told me some
    people's rates actually went DOWN.  (Can anybody confirm this?)
    
    Patti readily admitted to me the timing of this increase couldn't
    have been much worse.  The public perception is that interest rates
    are going down, and here DCU has an increase.  
    
    She also was convinced that DCU's current 11% auto rate is competitive.  
   
    Thoughts?
    
    - Chris
    
    

Well mine went up to 11.25%.  All these increases suggest that DCU doesn't
manage its loan portfolio's very well if they have to increase the %'s while
the rest of the industry is decreasing its interest rates.  It would interesting
to find out what the rest of the financial world is charging for new car loans.

-Wayne

    Mine also went up to 11.25%.  So much for the argument about adjusting
    the portfolio to 11% average!  I would think that would cap everyone
    at 11% MAXIMUM!  However, I won't bother to complain, all I've ever
    gotten is PR pablum!
    
    Again, the simple solution is to apply to a "real" bank for a
    refinance, which I am in the process of doing.  Also, someone ought
    to tell DCU that 11% IS NOT COMPETITIVE!!
    
    To paraphrase a comment made about the Hon. Gov. Dukakis, DCU just
    doesn't get it, do they?

    Could someone give me a pointer to another bank with a lower 
    interest rate.  I'm definitely pulling out - what rates have you
    found and where.
    
    Thanks,
    
    - Chris
    

    re. lower rates -
    
    when I was looking around for a 4-year, 80% loan for a car in January,
    DCU quoted 10.75% (just recently gone up to 11%). Most other banks
    were charging upwards of 12% at the time. So I don't consider the
    rate too uncompetitive. 
    
    But then, I had just arrived from the UK where rates on personal/car
    loans were running at upwards of 20%!
    
    John

        Maybe it's just as well that they wouldn't give me a loan :-( Can
        they adjust a loan for any reason they want? All the adjustable
        loans I've heard of are tied to some index to set their rates. If
        the index goes down they MUST lower the rate to correspond. What
        does the DCU paperwork say? 

    After reading so many notes, I feel members are not treated properly
    and DCU management don't care about us. Since DCU is benefit for
    Digital Employees, we should tell DEC that this organization does
    not serve the purpose for which it is chartered for. So please do
    something to rectify this problem or dissolve DCU. I am certainly
    taking my all accounts over time to some other institution. I like
    to hear everybody's view on this, and if majority of the people
    agree than we will write up the memorandum, take everybody's
    signature and present it to Digital's benefit manager or Vice President
    of the Personnel. 
    
    Bharat Shah

    Read your agreement on the car loan. It clearly stated that rates
    were variable and subject to go up or down. Payments would not
    fluctuate but the length of the loan could.
    
    Seems like those who complain are really mad at themselves for not
    understanding the lean contract they signed.
    
    Rich
    

    RE: -.1
    
    I think you're missing the point to this discussion.  I'm sure the
    people with DCU auto loans are aware that they received variable rates
    and know what that means.  The issue is why are the rates going up
    while interest rates in general are going down?
    
    When I checked out a car loan with DCU 2 years ago, they were a half a
    percentage point higher than the dealer could have gotten me from a
    bank where I didn't even have an account.  One phone call to Workers
    Credit Union (of which I wasn't a member) and I got a FIXED car loan
    rate 1.5 points lower than DCU.
    
    I don't know what their rates are now or how they compare with the rest
    of the market but the REASON they are using to increase the rate
    certainly sounds "interesting".  Does this mean they could decide to
    raise the rate (while others are dropping them) for ANY reason they
    deem fit?  Does the loan agreement spell out when and why the rates
    would be increased?
    
    Chalk up *YET ANOTHER* DCU slap at it's membership.  Pretty soon they
    will have nailed almost every member with stuff like this.  Next day I
    take off, I'll be opening an account at Peoples Bank.  I don't wish to
    be a "member" of an institution with such low regard for it's
    membership.  Looks like they learned a LOT from their little customer
    satisfaction survey.  Sounds like it only egged them on greater depths...
    

    Sounds just like the typical REAL_ESTATE notes on adjustable rate
    mortgages after the first move up.

    
    .re .16:
    
    Rich, I understood (as I'm sure everyone else did) that we were
    getting an adjustable rate for the car loan.  We're not all cryers
    who don't read the fine print.
    
    The point is, as stated in .17, "why did it go up?"  Every other
    interest rate in the country is coming down.  Are you saying that
    just because DCU has the right (form the contract) to raise the
    rate, that it is a "reasonable" thing to do?
    
    Nobody is complaining that they didn't know their rates could rise.
    We are complaing that it doesn't seem like a reasonable thing to
    do at this time.  
    
- Sean

    re: .19
    
    Amen!
    
    We also did not expect our rates to go up because DCU saw a need
    to "adjust" their loan portfolio, whatever that means!
    
    It's becoming very apparent that folks' relationship with DCU has
    become "we-they" instead of "us".  That's not how credit unions
    are supposed to work.  We are supposed to be *members*, but I certainly
    don't feel like one!

Hmmmmmm............ You guys signed a contract that has an adjustable rate 
provision without asking what the rate was tied to or what the criteria
were for DCU to make adjustments??????????????????

    The loan contract allows adjustments based upon the credit union's
    "cost of funds".  I suppose, in retrospect, that that leaves some
    room to maneuver, but many banks use such a criteria.  However, I
    have never known a bank to adjust it's loan portfolio based upon
    the need to have all loan reyturns average "x" percent.
    
    And, no, I don't think any of us signed a blank check, but I do
    think we have a right to be surprised when the DCU "cost of funds"
    seems to be on the rise as interest rates in general fall!

    I took an automobile loan with DCU in July of '86 at 9-1/4% because 
    it was the lowest rate around.  Interest rates, overall, were higher 
    then than they are today (I recall the dealership sales person 
    couldn't believe I could get that rate).  
    
    Up until recently, my loan rate had increased 1/2% to 9-3/4%.  Like 
    others have mentioned, it is now increasing 1% annually (the maximum
    increase allowed for any 6-month period).  
    
    While I'm not shocked that this is happening (they do have the freedom 
    to do so as it is an adjustable loan), I *am* confused.  If, overall,
    interest rates are lower now than they were then, why am I paying more 
    in interest?  
    
    Could DCU be trying to be "competitive" by having interest rates rise
    in line with the competition? (he says facetiously)

-Andy

    I talked to DCU president on Monday morning. According to him, DCU
    decided to increase auto loan rate to increase DCU earning. He also
    mentioned that DCU doesn't make money on auto loan. I was very surprised
    to hear that. Next question I had was why members earning lot less
    interest on their IRA compare to outside world. He didn't have answer
    to this. But he acknowledge that I was right. DCU did a survey
    (about 5000 people) and survey indicated majority of those 5000
    are very happy. I never received this survey. Did anybody receive
    it?? " DCU is doing very good job", according to Digital. According
    to DCU president DCU will post a note to answer some of the problems
    in 24 to 48 hours (it is already more than 48 hours) in DCU notes
    file. Any comments on any of the things I mentioned.
    
    Bharat Shah

    I also called the DCU after receiving notice my rate was increasing
    from 10.25% to 11%.  The answer I got was the DCU wanted to
    "adjust" the rates for many borrowers who were paying "high"
    rates.  So, in order to lower the rates for some, others ( like
    mine ! ) have to go up. Wonderful system.  I voiced my opinions
    in a letter to the DCU president, Mr. Richard Mangone.  If you
    are also unhappy, try writing.  Mr. Mangone was very responsive
    when I wrote to him about a problem with my home equity appraisal.

        re .25 and
        
>    ... The answer I got was the DCU wanted to
>    "adjust" the rates for many borrowers who were paying "high"
>    rates.  So, in order to lower the rates for some, others ( like
>    mine ! ) have to go up. 
        
        My wife is paying 13.5% on her (used) auto loan.  We haven't
        heard that her rate is going down.
        

    
    If DCU is raising it's auto loan rate to "increase DCU earnings" 
    (RE .24) and the contract ties increases to "cost of funds" then it
    appears that DCU has broken a LOT of contracts with its members. 
    Anybody in the legal profession out there know whether this may be
    grounds for legal action against DCU?  It certainly would help if you
    could get their reasons in writing.
    
    Customer survey???  Next joke!!!  What would it have cost to include a
    copy of the survey in the monthly statements (like their other PR
    BS) so that EVERYBODY could respond?  A total survey would give them
    a kick in the a__, not a pat on the back...
    

    Re .26, we just got a letter from DCU yesterday, our 5 yr. new auto
    loan is going down from 13.5 to 12.5. 
    
    The letter says, "In an effort to establish equitable and consistent
    rates amongst our borrowers, we compared your installment loan
    rate to our current structure. Effective September 1, 1989 there
    will be an interest rate adjustment......."
           
    So I guess everyone elses went up so ours could come down :*)
    
    Too bad they waited until there were only 10 more payments left on 
    the loan!
    
    Sandy

    This is an official response by Mary Madden of the DCU. The portion of
    that response, dated 14-August-1989, that applies to this note topic is
    included below. See note 2.22 for more information. 
    
    Your comments on this response should be posted here or directed to
    to DCU directly at Mary Madden's number (dtn) 223-6735 x207.
        
    Carl Leeber

******************************************************************************
       Response to .16
       
       
       RE: DCU RATE CHANGE
       
       PRIME INTEREST RATE
       
       Although the prime interest rate has recently declined, most 
       consumer loan rates have not decreased.  A decrease in the 
       prime rate usually indicates a forthcoming change within the 
       mortgage lending market.  Below is a rate comparison as 
       published in the August 5, 1989 BOSTON GLOBE:
       
       New Car Loan:  $10,000, 20-25% down, 48 months
       
       Average Rate Among	 Average Rate Among	     DCU*
       147 Financial Instit.       25 Credit Unions	
       (includes Credit Unions)   
       
               11.89%			  11.23%            11.00%
       
       *DCU offers auto loans at various rates based on the term 
       chosen by our borrower(s).  The lesser the term, the lower the 
       rate.
       
       Though we offer our members highly competitive rates within the 
       financial industry, automobile finance companies' rates tend to 
       be slightly lower because they are subsidized by the automobile 
       dealership as well as the manufacturers.
       
       COST OF FUNDS
       
       Over the past nine months DCU's cost of funds has risen 20%.  
       Therefore, it has been necessary for us to adjust our consumer 
       loan rates to meet this increase.
       
       As a financial institution, we invest our members' deposits in 
       loans to other members.  To retain deposits, our investment 
       rates must be competitive within the marketplace.
       
       For example, beginning January, 1989, there was a Certificate 
       of Deposit (CD) rate war waged throughout the Northeast.  
       Financial institutions were offering short-term CD's with rates 
       of 10% and higher.  In an effort to hold our deposits, DCU had 
       to compete by offering similar rates.  This increased our 
       dividend expenses (cost of funds) dramatically.  (Members 
       outside of New England benefited with rates significantly above 
       market).
       
       Our loan portfolio, therefore, had to be structured to generate 
       enough income to meet dividend expenses as well as our internal 
       costs. 
       
       VARIABLE RATES
       
       Finally, all DCU loan rates are variable with the exception of 
       some fixed rate First Mortgages.  This means that twice a year 
       (March 1st and September 1st) our Board of Directors can raise 
       or lower the interest rate on your loan by 1%.  The amount of 
       your payment will never change.  What will change is the number 
       of payments.
       
       How will a rate change affect you?  Example:  A member has a 4 
       year, 80% new car loan with a rate of 10.00%.  The monthly 
       payments are $369.28.  As of September 1st, the outstanding 
       balance on this loan is $8,000 and will be paid off in the next 
       two years (24 months) at a rate of 11.00%.  The difference in 
       rates will not change the amount of this member's loan payment.  
       Only the number of payments will increase.  In this instance, 
       the term increases by less than one full payment.  Instead of 
       24 payments, there will be 25.  Payment #25 will be 
       approximately $98.00.  This is an increase of approximately 
       $4.00 per month.
       
       If you have any questions or concerns how the rate change will 
       affect your loan, please contact MARY MADDEN at DTN/223-6735 or 
       508/493-6735.
******************************************************************************

    I was recently looking for a new car and, believe it or not, DCU
    rates are lower than banks. Baybank is charging 13.5% for a new
    car regardless of term. However, for those of you in the greater
    Worcester area, Worcester Central Federal Credit Union is charging
    a fixed 9.5% for new cars for all terms up to five years. Luckily
    my husband and I are members of WSFCU and our loan business goes
    with them. I won't sign a variable rate loan again.
    
    Linda

Within the last month or so, the Manchester Union Leader had a full page listing
of rates for Banks, S&L's, and Credit Unions in New Hampshire.  Of course DCU
was not listed, but other credit unions were.

DCU was higher than the other credit unions in most if not all (I have not
looked at the paper for a while and want to be accurate in what I say)
catagories that they offer.

I even saw banks (20-30%) that had cheaper loan rates than DCU and gave a better
return for money in savings.

This really impressed upon me, that you must shop around.  DCU will not have
the lowest rate, just as most banks won't.

*OPINION*
DCU tries to offset costs and in my estimate is short sited and hurts its
members in the long run.

It really comes out that you must shop around.  Do not think just because
DCU is a credit union they will be cheaper or give you a better return
on your money.  Same goes for a bank and S&L.

	- mark

I just got a flyer from the CU I have my auto loan with.  New car loan for 48
months with 20% down is 9.9%.  If you will let them automagically take it from
your bank account, the rate drops to 8.9%.

On the cost of funds bit, I'm still getting a yield of over 10% on my 90 day
CDs at my savings and loan.

Bob

    Here is the information I referred to in .-2.  this is from the
    Manchester Union Leader.  It is a page called New Hampshire Shoppers
    Credit Guide.
    
    		Credit	Annual	Grace
    		Card	Fee	Period
    		Interest
    		FIXED
    Granite	13.20%	12.00	Y
    State
    
    NH Federal	15.00%	10.00	N
    
    It has a bunch of other numbers, about interest earned and the like.
    DCU is a little more expensive then NH Federal and is out of line
    compared to Granite State.
    
    Most banks interest on credit cards in between 16.00 and 18.00.  I saw
    a one at 15.75.
    
    As far as new cars:
    
    I saw the following (20-25% down for 48 months):
    				Personal
    				Unsecured
    Granite State	12.50	15.90	
    NH Federal		11.80   16.00
    Northeast Federal	10.25   15.00
    St. Mary's		12.75   16.25
    
    I saw banks with car loans in the 10.50% and some as high as 14.10%.
    I was suprised at how many were below 12.50%, though.
    
    From reading the paper, I would say DEC is not competative with any of
    the Credit Unions in NH and amazingly not with 10-20% of the banks...
    
    Makes me wonder what DCU does with all the interest that we pay them?
    
    	- mark

    I talked to Mary Madden yesterday on her note. I am not happy with
    what she told me(same old thing, "We are very competitive, We don't
    make money on Auto loan, Our IRA rate are very competitive,") Next
    thing I asked her to give me a name of the people who voted for
    increase, so come election time we remember them. Following people
    voted for the increase;
    
    1. Dan Infante 	MLO1-4/P14
    2. Jeff Gibson	MLO2-2/T83
    3. Shirley Obrien   MLO15/D14
    4. Mark Steinkrauss MSO/K10
    5. Susan Shapiro    MRO1-1/UP7
    6. Jack Rugatimer   MSO1/D7
    7. Abbott Weiss     MLO1-2/A55
    
    
    Bharat S. Shah

    DCU is not the cheapest around:
    
    current DCU rate 15%, The Co-operative Bank (of Concord, MA) 11.5%
    
    

    In response to 191.35, DCU has sent rate data for posting in this
    conference. Note number 212 and its replies will contain this
    information. 
    
    If you would like more information on DCU's rates and services, please
    call [DCU] Member Service Center at DTN/223-8444 or 508/493-8444 or call
    Mary Madden at DTN/223-6735 or 508/493-6735. x207. 
    
    Carl
    	Not The Moderator - Just the extractor
    

        While we a re on a roll, what would be nice is the formulae used
        to calculate loans.
        
        ideally, I would like to have a spreadsheet that I can pump values
        into and see what DCU can do for me. Recent notes infer that they
        may be using the "Rule of 78" method for calculating loan
        repayments. 
        
        IF Someone from DCU can confirm the methods used, I might even
        make up the spreadsheet for them.
        
        Why? I'd like to base the car I wan't to buy on what I can afford
        to pay per period rather than the interest rate...
        
        q
        

I thought someone entered the formula earlier? In case it wasn't:

                              p * i
   Monthly payment =  --------------------
                      1 - ((1 + i) ^ (-t))

	p = principle
	i = monthy interest rate
	t = number of months

Or, expressed another way:

	MONTHLY_PAYMENT = (PRINCIPLE * MONTHY_INTEREST_RATE) /
		(1 - ((1 + MONTHLY_INTEREST_RATE) ^ -PERIODS)

If the DCU is using some other calculation, then something is amiss...

This is the formula every bank I have ever dealt with uses to determine the
payments for mortgages, car loans, personal loans, etc.

-Glenn-

P.S.: Don't almost all spreadsheet programs have a built-in function that
performs this calculation for you?

        From an accounting reference manual from the ZKO Library (I didn't
        note the title, but can do so if required....
        
        ------
        We introduce the following notation to assist in the discussion of
        several approximating formulae.
        
        	n = the number of payments, excluding the down payment.
        	m = the number of payments in one year.
        	i = the annual rate of interest
        	R = the payment per payment period.
        	B = the unpaid balance i.e. cash price less down payment.
        	I = Rn - B = interest (carrying) charge).
        
        Merchants Formula.
        
        the formula reflects the assumption that the periodic payments are
        applied first against the unpaid principal B and then against the
        interest charge I. the interest rate i is expressed as
        
                2mI
        i = --------------------
             B(n+1)  -  I(n-1)
        
        The Constant Ration Formula.
        
        The formula reflects the assumption that each payment is to be
        applied against both the unpaid principal balance and the interest
        or carrying charge in the same proportion as the original unpaid
        principal balance and total interest charge imply. The interest
        rate i is expressed as 
        
                  2mI
        i = --------------------
              B(n + I)
        
        The Direct Ratio formula.
        
        This formula expresses the annual interest rate i as 
        
                    6mI
        i= ------------------------
            3B(n + 1) + I(n - 1)
        
        rule of 78.
        -----------
        A third general approximating method is found in the operations of
        many finance companies. Specifically, finance companies wish to
        allocate the interest received on installment contracts to the
        various months of the year. The true allocation is approximated by
        using the rule of 78. The rule is followed by many finance
        companies in allocating earnings on loans among the months of a
        year on a sum-of-the-months'-digits basis. The sum of the digits
        from 1 to 12 is 78, so 12/78 ths of the years earnings are
        allocated to the  first month, 11/78ths to the second, and so on.
        
        q
        

    This is an official response by Mary Madden of the DCU. The portion of
    that response, dated 07-May-1990, that applies to this note topic is
    included below. See note 2.22 for more information. 
    
    Your comments on this response should be posted here or directed to
    to DCU directly at Mary Madden's number (dtn) 223-6735 x207.
        
    Carl Leeber
******************************************************************************

    Response to 191.37
    
         DCU's consumer loan interest is based on a simple
         interest calculation.  DCU does not calculate payments
         using "Rule of 78."  Interest is calculated daily, based
         on the outstanding principal balance.  The following
         formula outlines the calculation for a consumer loan
         interest payment:

                   o.b. x #days x i.r.
                   __________________  =  interest due
                          365

         o.b.   = outstanding balance
         #days  = number of days at the same principal balance
         i.r.   = interest rate (expressed as as decimal)


         For example, if your outstanding balance is $3596.12,
         your interest rate is 11.75% and it has been 31 days
         since your last payment, your interest calculation would
         be the following:

                   $3596.12 x 31 x .1175
                   _____________________  = $35.89
                            365
 
         Each time the principal balance changes during the
         period (i.e. payments, advances) reapply the formula.

         *This formula does not apply to First Mortgage, or VISA
          programs.

         If you have additional questions, please call Mary
         Madden, communications manager, at DTN/223-6735, x207 or
         508/493-6735, x207.

******************************************************************************