If you are thinking about buying a new or used car, a credit union is a great choice for a loan.
“Part of the reason is good credit union business,” says Mike Schenk, deputy director of advocacy for policy analysis and chief economist at the Credit Union National Association (CUNA), a trade association. “You would be crazy not to include a credit union in your buying plans. “
National banks have certain advantages over credit unions. They have more branches and are generally faster at deploying new technology. But consumers wanting to save money should explore what credit unions have to offer.
What Are Credit Union Auto Loans?
Auto loans from credit unions use money deposited by members to lend to other members for loan purposes, including the purchase of a new or used vehicle.
By using members’ money to lend, credit unions are able to charge lower interest rates, pay members dividends, and offer members higher savings rates on accounts through compared to obtaining a bank car loan.
What are the differences between a car loan from a dealership, a bank, and a credit union?
The main difference between an auto loan from a bank and a credit union is the financing conditions. Some banks are able to offer promotions, especially if you have a long relationship and a good payment history and good credit rating.
Banks and credit unions may offer incentives such as automatic payment if you are an existing customer, which may even qualify you for a discount on the interest rate. But since credit unions are non-profit and owned by their members, you can usually get better rates and lower fees compared to for-profit banks, which are owned by shareholders.
When you get a car loan from a dealership, the loan comes from a bank or a third-party financial entity. Dealerships are paid to give you a loan with one of their partners, so the deal you get to finance a car through a dealership versus a bank or credit union may not not be the best option for you. Also, if there is a problem with the finance company, the dealer will not help you – you will have to fix it yourself.
6 reasons to get your car loan from a credit union
If Shopping For Your Next Car, Consider These Six Benefits Of Getting A Car Loan From A Credit Union
1. Lower interest rates
One of the main reasons credit unions see rapid growth in auto loans is that their interest rates are at least 1% lower than those of banks. In the first quarter of 2021, the average rate on a new five-year auto loan from a credit union was 2.98%, according to the National Credit Union Administration (NCUA). In banks, it was 4.77%. If you borrow $ 30,000 for a car, the credit union saves you $ 1,451 in interest over the life of the loan.
Credit unions are able to offer lower rates because they are non-profit, unlike most banks.
“Typically, the lending rate (in credit unions) is very competitive with other lenders in most circumstances,” says Bill Meyer, public relations and content manager at CU Direct, which connects the co-ops. credit to car dealers across the country.
2. Community links, personalized service
The auto loan process is not that different at banks and credit unions. But credit unions, because they’re smaller and have strong ties to the communities they serve, are more likely to work with you if you’re going through a tough time and need more time to make a payment. , for example.
If your credit score is lower, you may be eligible for a car loan from a credit union versus a bank.
“Credit unions are likely to have more flexibility in the underwriting process,” Schenk said. “You have a unique story and your story is much more likely to be heard in a credit union. At large financial institutions, you are more likely to experience an underwriting set in stone and done at a head office located in a few states. Walk into a credit union and you’ll have a better chance of having a conversation.
3. User-friendly loan process
Previously, members had to go to the credit union office and apply for a car loan face to face with a loan officer. This is not the case today, according to Meyer. Credit union loan applications may be available at a car dealership, online, or over the phone.
If you are applying for financing from a dealership, “invariably the dealership can direct you to financing a credit union and a credit union that you can join as a member,” says Schenk, “that is. so really an easy process ”.
If you are considering applying for a car loan from a credit union, it is best to go with it directly rather than through the dealership. Not all dealerships work with credit unions, and if you can become a member, you will likely get the best deal by working with the credit union directly.
4. Credit unions have many other advantages
Credit unions are owned by their members – not their shareholders – and any profits they make go to the members. For this reason, credit unions may also offer lower costs on other products, including mortgages, home equity loans, unsecured personal loans, and credit cards.
Most credit unions also participate in a network of branches and shared ATMs. Schenk says CUNA members have a shared ATM network with more than 40,000 outlets.
Credit unions also focus on educating their members, so you can get advice on what financial options are best for your situation.
“Credit unions are full services, with the same products as banks. They are just structured differently, and that translates into significant benefits for members of credit unions, ”said Schenk.
5. Becoming a member is easy
Some people have the impression that credit unions are only open to people who work for a certain company, industry or government entity and that anyone outside of a group cannot join. Meyer says that’s no longer the case. “Most credit unions will allow anyone to register. “
CUNA has credit unions with community charters that allow them to serve larger geographic areas. If you are looking for a credit union near you, visit ASmarterChoice.org and enter your postal code. “It would be shocking to find a consumer who doesn’t have access to a credit union,” says Schenk.
6. Auto loans are a big part of what credit unions do
Don’t be surprised if an auto dealership refers you to a credit union before a bank.