Getting credit union auto loans may be a preferable alternative to taking a loan from a bank or other lender. Credit unions are not-for-profit organizations owned by the people who take loans from them, meaning that many different loan options or lower car loan rates may be available to make your car finance cheaper and easier.
What is a Credit Union?
Credit unions are locally-run organizations which are smaller than banks, and usually have less than 100 million dollars in assets, as opposed to banks which may have several billion. Because of their small size, credit unions are more personal, and can offer more options tailored to your specific needs. Since credit unions are not-for-profit, the monies gained from interest on repaid loans can be used to help its members. Credit unions are run in a democratic fashion, so the people who oversee it are elected by those who have accounts with the union.
Credit unions make auto loans to members only. Many credit unions offer membership to people that belong to a specific group, organization or live in a specific area.
In addition to making their auto loans available to members only, credit unions can have somewhat higher standards when it comes to approval of auto loans. Credit unions are smaller, and generally have fewer capital resources from which to make loans. Therefore, they generally require borrowers to have good or excellent credit in order to be approved for a car loan.
Banks are Bigger and They Have More Money
While larger commercial banks can absorb the losses associated with loan defaults and repossessions, credit unions are not usually able to suffer such losses and survive. So, they are usually a lot more careful and particular about to whom they loan money.
Lower Rates
Due to the non-profit nature of a credit union, interest rates are going to be lower than a traditional bank may offer. Where a traditional bank offers a 48-month car loan at 6.01 percent, a credit union can offer the same loan at 5.49 percent, according to Datatrac from December of 2008.
No More Fees
Traditional banks began the practice decades ago of levying additional charges and fees accompanying loans issued. Since credit unions are created to provide members better financial services, auto loans issued to members do not normally carry a lot of miscellaneous fees. Additionally, since most memberships in credit unions come with an obligatory checking or savings account, and since payroll direct deposit is emphatically encouraged, additional factors such as payment convenience also tend to make credit unions a perfect choice for handling all financial needs. Automatic payments can be deducted at the needed moment, allowing a member's funds to stay in an interest bearing account until the very last moment.
Personalized Financing and Refinancing
If you are a member of a credit union, you may be able to completely finance your new vehicle. Some credit unions offer up to 100 percent financing. Individuals who wish to refinance existing loan terms are also welcome to recalculate existing loan terms and take advantage of a lower monthly payment.
Online Application
Credit unions are often very convenient for a number of reasons, among which is the ability to apply for a loan online. Check your local credit union to see if online application is available.
Loan Protection Insurance
If refinancing isn't enough to keep you afloat in tough financial times, loan protection insurance, which is offered by many credit unions, can prevent you from defaulting on your loan, so you get to keep your vehicle even if things turn out badly.
The options available to you may vary depending on where you live, the credit union you choose, and your credit history. For details about your specific credit union, you should contact them directly via Internet or phone.
