Why you should get your car loan at a credit union Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial choices by providing you with interactive financial calculators and tools that provide objective and unique content. We also allow you to conduct your own research and compare data for free and help you make sound financial decisions. Bankrate has agreements with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Profit The offers that appear on this website are provided by companies that pay us. This compensation could affect how and when products appear on this site, including for instance, the sequence in which they be listed within the categories of listing in the event that they are not permitted by law. Our mortgage home equity, mortgage and other products for home loans. However, this compensation will affect the content we publish or the reviews you see on this site. We do not cover the vast array of companies or financial offers that may be available to you. Emma Turner/Shutterstock.com
5 minutes read Read March 02, 2023
The article was written by Meaghan Hunt Written by personal financial contributor Meaghan Hunt is a researcher, writer and editor in a variety of disciplines who is passionate about personal finance issues. After 10 years of work in public libraries She now writes, edits, and conducts research as freelancer full-time. Editor: Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers feel confident to control their finances through providing concise, well-studied information that breaks down complicated topics into manageable bites. The Bankrate promise
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Credit unions can offer more advantages to the borrower than other banks can compete with. Lower interest rates, a community presence, and a business that is geared towards the borrower model distinguish credit unions from other banks.
Six reasons to take out a credit union car loan If you’re shopping for your next vehicle, think about these benefits of getting an auto loan from an institution like a credit union. 1. Lower interest rates . Unlike bank, credit unions are able to offer lower rates because they’re not a profit-making institution. Therefore, they’re seeing an exponential rise in auto loan originations. “Typically, the lending rate (at the credit unions) is competitive to other lenders in the majority of conditions,” says Bill Meyer who was the former public relations manager and content manager at CU Direct, which connects credit unions with dealers of all kinds across the country. In the final quarter of 2022, the on the five-year new car loan from a credit union was 4.74 percent as per the NCUA. In banks the rate was 5.53 percent. When you borrow $30,000 to finance a car and the credit union is able to save you $327 in interest over the course that of the loan. 2. Personalized service, community connections The process of getting a car loan isn’t that different between bank and credit union. However, if you have an unsatisfactory credit score, you may still be eligible for an auto loan through a credit union versus a bank. “Credit unions are likely to be more flexible in the underwriting process,” says Mike Schenk, vice president of research and policy analysis for the Credit Union National Association (CUNA), a trade association. The credit union is also likely to work with you if you hit the rough spots and require more time to make an installment. “You have a distinct story and your story is much greater chance of being heard by the credit union. When you work with large financial institutions there is a greater chance that you will have underwriting procedures that are established in stone and executed in some corporate office a couple of states away. If you visit a credit union, and you’re more likely have a discussion.” 3. An easy loan process Gone are the days of needing visiting a branch to get a car loan. Many credit unions are now letting you apply online, on the phone, or . If you’re applying for financing at a dealership, “invariably, the dealer may recommend credit union financing and the credit union that you can join as a member,” Schenk says, “so it’s a simple process.” However it is recommended to do your research prior to visiting the dealership. Some dealerships don’t work with credit unions, and if you are able to become a member, you will likely receive the best price when working directly with the credit union. Plus, you will already have a competitive loan offer when you start your car search and won’t need to pay for dealer markup on your rate. 4. Credit unions offer a variety of other benefits Members, not shareholders, are the owners of credit unions and any profits they earn go to the members in dividends. Credit unions can also pass on profits to their members via more favorable rates for deposit accounts as well as on loan products, such as auto loans. Most credit unions also participate in a shared branch as well as ATM network. Schenk states that CUNA’s members are part of a shared ATM network with more than 40,000 ATMs. Credit unions are focused on educating their customers as well, which means you are able to get help regarding the best options for financial planning for your situation. “Credit unions are full-service, offering the same financial products that banks offer. They’re just structured differently, which results in substantial advantages for members of credit unions,” Schenk says. This member focus could also result in a more precise discussion regarding your financial situation prior to when the credit union approves or declines your loan. Credit unions are often more understanding and lenient than traditional banks with regards to lending decisions. 5. It’s easy to join. Many believe that credit unions are only open to those who work for a certain company, industry or government organization, and that those who are not member of a group cannot join. Meyer states that this is no longer the case. “Most credit unions will allow anyone to join.” CUNA has credit unions that have community charters, which allow them to serve greater geographic areas. If you’re looking for the nearest credit union then go to the website and enter your ZIP number. “It is a shock to meet a customer who didn’t have access to an institution of credit,” Schenk says. 6. Car loans make up a large portion of what credit unions do Don’t be shocked if an auto dealer refers the customer to a credit union before a bank. Credit unions for used and new cars alike increased to 17.9 percentage and 19.9 percent and 19 percent, respectively, according to 2022 . Credit unions had $166.8 billion worth of loan balances for brand new cars at the end in the 3rd quarter 2022, and $305.3 billion of used vehicles. How do I apply for a credit union auto loan? Financing a car through the credit union is comparable as other loan providers, with the exception for the membership process. If you are an active member, you are able to apply for an auto loan online, over the phone , or at an office, depending of the institution. The majority of credit unions will look over the following information to determine your eligibility in the event of an auto loan your personal information. Your income and employment information. Your . The VIN number for your vehicle. (VIN) and the miles for the car you wish to purchase. Be prepared to provide proof of insurance to the credit union as part of the application process. And note that while you might be able to enroll and request an auto loan the next day, some credit unions require you to wait a month or two prior to submitting your application. What is the difference between a dealership, bank and credit union car loan? The primary difference between a bank and the credit union car loan is the terms of financing. Some banks offer discounts particularly when you have a good relationship, good payment history and a . Credit unions as well as banks may offer incentives like an autopay discount if you’re an existing customer. But because credit unions are not-for-profit organizations and run by members, they typically get better rates and reduced costs compared to banks that are for profit that are owned by shareholders. When you get a car loan it is because the loan comes from a third-party financial institution. Dealers receive compensation to connect you to one of their financing partners. This means that you may have better options to choose from than the rates you get through the dealership , compared to the interest rates offered by a credit union or bank. Plus, if there is any issue with the finance company they won’t be able to help you — you will have to sort it out your own. If you are looking to purchase a used or new vehicle There are many options to choose from for financing. If you’re a member of a credit union, you may have access to lower rates of interest and charges compared to banks with large branches or dealership loans. The application process is similar after you’ve joined and the benefits could assist you in getting approval particularly in the event that you don’t have the highest credit score.
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Written by Personal finance contributor Meaghan Hunt is a researcher and writer across various disciplines who has a passion for personal finance issues. After a decade of working in public libraries, she currently edits, writes, and researches as freelancer for full-time. Edited by Rhys Subitch Editored by Auto loans Editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to control their finances by providing clear, well-researched information that breaks down otherwise complex subjects into bite-sized pieces.
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