Although there are many ways to establish a car loan when you’re purchasing a new or used ride, some financial entities will save you more money and deliver more personalized service than others. Here are five advantages to securing a car loan with a credit union rather than a commercial bank.
Lower interest rates
Per Libby Wells, contributor with Bankrate, one of the main advantages of opting for a credit union loan is their interest rates tend to be at least one percent lower than bank interest rates. According to Sabah Karimi, contributor with U.S. News & World Report, a $30,000 car loan will garner an interest rate of 4.16 percent from a bank, while that same loan will secure a rate of 2.82 percent at a credit union. For a vehicle of this value, you can save a total of $1,100 over the loan’s duration by opting for the credit union auto loan.
Personalized loan process
Since credit unions are non-profit entities, operational decisions are made by a local team of volunteer board members rather than a remote corporate office, as Karimi points out. It’s easy to make an in-person appointment to talk with a professional face-to-face about your financial situation and payment plan terms. As Wells explains, credit unions are also more likely to be flexible with loan terms and repayment options if you encounter financial troubles later on.
Relaxed membership requirements
While some credit unions cater to special interest groups like teachers or local residents, requirements for joining one are low-key most of the time. “Most credit unions will allow anyone to join,” as Bill Meyer, with public relations and corporate communications at CU Direct, points out. Plus, credit unions offer a wide variety of services besides car loans, which might be useful to access later on, as Nerdwallet contributor Philip Reed advises.
Better chance of loan approval
Another benefit of going with a credit union auto loan is it’s more likely to be approved, even if you have had or currently have bad credit. It’s all too common for commercial banks to exclude loan applicants based on corporate requirements that applicants have superior credit scores. “Though the loan application process is the same and the underwriting process is similar, the credit union may make some adjustments that a commercial bank would not,” Karimi states.
A side bonus of initiating a car loan with a credit union is you’re privy to a wide array of insider benefits, Wells highlights. Since credit unions are nonprofits owned by members, its profits go directly to members; unlike in the case of a commercial bank whose shareholders garner the profits. “Credit unions produced over $10 billion in direct benefits to their members in the past year because of their lower interest rates, lower fees and higher yields on savings,” explains Mike Schenk, vice president of research and policy analysis/advocacy at the Credit Union National Association (CUNA).
Lower rates and excellent customer service characterize credit unions, making the loan application and payment process smoother when funding your next automobile. Contact your local credit union to inquire about their interest rates and auto loan terms to reap the benefits associated with this smaller, individual-centric financial institution.