5 Reasons to Get an Auto Loan From a Credit Union Instead of a Bank

It’s time to get some new wheels. Purchasing a car is a big decision, but deciding where to finance your new or used vehicle can be just as significant as the make or model you choose. You may automatically think of a traditional bank or dealership financing, but a credit union auto loan could be a better borrowing decision and potentially save thousands of dollars over the life of the loan.

Read on to learn five reasons why to consider getting an auto loan from a credit union.

What Is a Credit Union Auto Loan?

To understand a credit union auto loan, you first need to understand credit unions. Let’s start with what banks and credit unions have in common. Banks and credit unions offer similar types of financial services. You can open a savings or checking account at either. Banks and credit unions provide the same loan options, including personal loans, home mortgages, auto loans, and student loans.

Auto loans from credit unions work in much the same way as a car loan from a bank. You borrow money and pay it back, with interest, over a defined length of time. The federal government insures deposits made at either institution. The standard FDIC-insured coverage limit is $250,000 per depositor, per institution, and per ownership category.

The primary difference between a credit union and a bank lies in their ownership structures and profit statuses. Banks are for-profit entities, meaning they are publicly traded or privately owned. If you join a bank, you are called a “customer” and have no ownership interest in the institution. Banks focus on shareholder profits and pay earnings to their stockholders, who may or may not be customers of the bank.

Credit unions are nonprofit financial institutions. Credit unions range in size, while many serve a niche population, others have thousands of members and operate nationwide. If you join a credit union, you are known as a “member” with varying requirements and membership fees. More than 5,100 credit unions exist with more than 123 million members. 

Credit union members usually have a commonality. They may serve a specific type of employee, such as teachers or firefighters. Others are geared toward veterans and U.S. service members. Community-based credit unions serve people who live or worship in a specific area. A credit union elects a board of volunteers to oversee the organization. If a credit union generates a profit, it returns it to its members, usually through lower fees and lower interest rates.

5 Reasons to Get a Credit Union Auto Loan

Credit unions offer many benefits that banks don’t. The main difference is that a loan from a credit union often provides a lower interest rate, flexible terms, a simpler pre-approval process, lower fees, and more personalized customer service. A credit union can be a good option if you’re financing or refinancing a car, truck, RV, motorcycle, or anything with wheels. 2250 1950

1. Lower Interest Rates and Cost Savings

One of the most significant differences between credit union and bank auto loans is the interest rate. Since credit unions work for their members instead of for profit, they offer higher savings rates and lower loan rates. Credit unions’ rates are often a whole percentage point lower than banks’. The difference might seem small, but over a five-year loan, even a 1% difference in interest can save you a bundle.

Let’s look at an example. You buy a new car for $30,000. Your bank offers a 7.5% interest rate on a 5-year loan, with monthly payments of $601.04. Now you go to a credit union that provides a loan at 6.5%, with a monthly payment of $586.98, a difference of $14.06. You may not think that’s too much, but over the course of the loan, it’s a difference of $843.60. Wouldn’t you love to have that extra money to spend or invest somewhere else?

2. Personalized, Member-Focused Service

The core of a credit union’s success lies in providing exceptional customer service, with relationships built within it as unique as its members. 

The average bank is about double the size of a credit union. Unlike banks, where customers may feel like just a number, credit unions tailor services to each member’s unique needs and offer members more personalized services. 

The teams at credit unions are invested in helping members navigate financial decisions and overcome challenges. The sense of personal connection fosters a financial relationship built on trust and collaboration.

In addition to focusing on individual members, credit unions embed themselves in their communities, supporting and engaging with the local areas where their members reside. Their approach to business is to put their members and communities first. Community engagement helps credit unions build trust and enhance their reputation. Known for organizing and participating in local events and volunteer opportunities, they boost awareness and strengthen community ties.

3. Flexible Loan Terms and Options

When deciding between a credit union and a bank for an auto loan, you want to factor in your total loan requirements. Credit unions have more flexibility than banks to work with you on loan amounts, typically offering lower minimum loan amounts to pay off quickly or a longer-term arrangement to reduce monthly payments.  

Since banks operate for profit, they prefer people who take out larger loans for longer periods, as this allows them to make more money. 

With credit unions, you’ll find terms ranging from 36 to 84 months with no hidden fees or prepayment penalties.

4. Easier Pre-Approval and Negotiation Power

Banks review credit scores and approve or deny borrowers based on established thresholds. Credit unions take a more holistic approach to loan applications. They look more broadly at your financial picture and weigh factors beyond your credit score. They work with you to help find the best loans to meet your financial needs. 

If you have a lower credit score or have gone through some trouble with your finances, a large corporate bank may be set in stone and push you through for someone more qualified. The reality is, they don’t need your business. But a credit union can help you get back on track if your credit history isn’t pristine. 

Credit unions often work directly with members to understand their financial situation and find ways to approve loans that banks might deny. The lending process at credit unions tends to be more personal and flexible, with loan officers having more discretion to make decisions based on individual circumstances. This can be especially helpful for first-time car buyers, younger borrowers, or those rebuilding their credit.

5. Fewer Fees and Transparent Loan Costs

As well as having lower interest rates, credit unions are known for having lower fees. You often see credit unions offer no-fee checking accounts or loan applications. Tacked-on bank fees add up quickly and make a big difference in what you pay. 

Nearly all banks and credit unions charge fees for late payments, bounced checks, or other banking errors, but because of their nonprofit status, credit unions charge lower fees and will work with you to repair your financial situation.

How To Apply for a Credit Union Auto Loan at The Focus Federal Credit Union

To borrow from a credit union, you need to become a member. This is usually a straightforward process involving a small deposit and meeting basic eligibility criteria. Once you are a member, you can apply for a credit union auto loan.

To apply for a credit union auto loan, you’ll need to provide:

• Income Verification. Have W-2 forms, pay stubs, income tax returns, pension/social security documents, and any alimony and child support papers available.
• Asset Verifications. Include bank statements, as well as any retirement and investment account balances.
• Debt Disclosures. Provide your student loans, other auto loans, credit card debt, and any existing mortgage documents.
• Credit History. The lender will check your credit to make sure you can repay the loan. For this, you’ll need to provide permission to check credit and any bankruptcy or foreclosure records.
• Employer Confirmation. You’ll need the name and contact information for your employers.
• Vehicle Information. Be ready to provide the vehicle’s make, model, and purchase price.

Drive Away With More Money in Your Pocket

The Focus Federal Credit Union membership doesn’t require you to be a part of a specific industry, company, or job type. You simply need to live, work, worship, or attend school in Oklahoma, Cleveland, Canadian, Lincoln, Logan, McClain, or Grady counties. 

The team at TFFCU looks forward to having the opportunity to serve you and welcome you to the family. We can talk through what you need to get an auto loan and develop a payment schedule that works for you. We are here to help get you approved and on the road.

Lindsey

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