5 Reasons to Get an Auto Loan From a Credit Union Instead of a Bank
Monday, Apr 26 2021
It’s time to get some new wheels. But deciding where to finance your vehicle can be taxing. Here are five reasons to get an auto loan from a credit union instead of a bank.
What’s the Difference in a Bank and a Credit Union?
It’s first important to understand the similarities and differences between banks and credit unions.
Let’s start with what they have in common. Banks and credit unions offer similar types of financial services. You can open a savings or checking account at either. Most banks and credit unions offer the same loan options, including personal loans, home mortgages, auto loans, and student loans.
The federal government insures deposits made at either institution. The standard FDIC-insured coverage limit is $250,000 per depositor, per institution, per ownership category.
A credit union and bank are different in their ownership structure and profit status. 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 pay earnings to their stockholders who may or may not be customers of the bank.
Credit unions are non-profit institutions. More than 5,100 federally insured credit unions in the United States have more than 123 million members.
If you join a credit union, you are known as a “member.” You have to pay a membership fee to belong. Historically, credit union members have a commonality, such as where they work or the community where the members reside.
The members control the credit union. They elect a board of volunteers to oversee the organization. Credit unions pay earnings to members, usually as lower fees and lower interest rates.
5 Reasons to Get an Auto Loan from a Credit Union
Credit unions offer many benefits that banks don’t. Here are five reasons to get an auto loan from a credit union.
- Lower Interest Rates
On average, credit unions offer higher saving rates and lower loan rates. Since credit unions work for their members instead of for profit, they offer more competitive rates than banks.
The National Credit Union Administration reports that as of March 2021, five-year loans for new cars at banks had an average interest rate of 4.77 percent, compared with 2.98 percent at credit unions. At Focus Federal Credit Union auto loan rates are low. Check out our current rates here.
- Better Loan Approval Odds
Working with a credit union gives you a greater chance of getting your loan application approved.
Credit unions take a more holistic approach to loan application reviews. They take a larger view of your financial picture, so you may have an easier time getting your car loan approved.
A credit union weighs outside factors other than just your credit score and works with you to get you approved. A bank looks at credit scores and approves or denies you based on established thresholds.
Credit unions work with you to help find the best loans to meet your financial needs. And if your credit history isn’t pristine, they work with you to get you back on track.
- Lower Loan Minimums
Credit unions typically offer lower minimum loan amounts than banks. If you decide between a credit union or bank for an auto loan, you may want to factor in your total loan requirements.
Credit unions have more flexibility than banks to work with you on loan amounts. Again, since the banks work for profits, they prefer people who take out larger loans for an extended time where they have the opportunity to make more money.
- Lower Fees
Similar to having lower interest rates, credit unions are known for having lower fees than banks. You often see credit unions that offer no-fee checking accounts or loan applications. Tacked on fees at banks 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 non-profit status, credit unions have lower fees. Banks work to make money for investors, so they charge higher fees and are less forgiving than a credit union.
- Local Operations and Personalized Experience
The mission of credit unions is to serve their members. So you will see differences in your interactions with banks and credit unions.
The average bank is about double the size of a credit union. Since credit unions tend to be smaller, they offer members more personalized services. Many credit unions are community-based, and their approach to business is to put their members and community first.
If you join a credit union, you typically work with people who have a common goal of helping you with your financial well-being. Since members have a commonality, you experience more personalized services.
How Focus Federal Credit Union Can Help
Credit unions focus on members instead of stakeholders, which drives everything they do. Member focus is the primary reason you should use a credit union for your auto loan.
The team at Focus Federal Credit Union can talk through what you need to get an auto loan. We work with you on a payment schedule that works for you. We are here to help get you approved and on the road.