If you’re shopping around for a new car to finance, you’ll need to shop for an auto loan too. Credit Unions are often overlooked as a lender because many people believe it’s difficult to become a member or they are simply unaware of the lending services they provide. On the contrary, not only are many credit unions easy to join, but they often offer benefits that many other lenders do not. Here are three reasons you should consider an auto loan from a credit union.
Lower Interest Rates
Unlike banks, credit unions are member-owned and not-for-profit organizations. Without having shareholders to answer to, credit unions can offer much lower rates on loan products, such as auto loans. Interest rates offered by credit unions are often 1% to 2% lower than rates offered by big banks.
According to the National Credit Union Administration, as of June 2019, the national average bank interest rate on a new car loan with a term of 48 months was 5.10%. The national average credit union interest rate for the same loan term was 3.57%. While roughly 1.5% may not seem like a big difference, the lower interest rate could save you hundreds, possibly even a thousand or more, over the life of the loan.
Better Approval Odds
Because credit unions have stronger ties to their local community and the members they serve, they are more likely to work with consumers who have less than desirable credit scores. Credit unions are more likely to have flexibility in the underwriting process, unlike big banks who often have more rigid underwriting.
When considering loan applications for members, many credit unions will often look at other factors aside from just their credit score. For example, a longtime member in good standing may still be approved for an auto loan despite having less than perfect credit. Of course, being a member doesn’t guarantee approval, but you’re likely to have better odds with a credit union than a big bank.
Access to Member Benefits
Low-interest auto loans aren’t the only benefit of joining a credit union. Once you become a member of a credit union, you gain access to additional benefits which could include lower interest rates on various products, lower fees, and higher yields on savings accounts. Members also enjoy lower costs on mortgages, home equity loans, personal loans, and credit cards.
Many credit unions are dedicated to educating their members and provide guidance to assist members with important financial decisions at no additional cost. Overall, compared to bigger banks, credit unions offer a more personal, full-service experience with more benefits.
It’s likely that a credit union will offer a lower rate and provide more benefits than a larger banking institution, but it’s still important to do your research. When shopping for an auto loan, compare a variety of lenders and carefully consider your options to ensure you choose the lender and loan that’s right for you.
To learn more about choosing the right auto loan, go online at caminofcu.org or contact us at (800) 835-3400. For more helpful tips and information about banking and personal finance, follow us on Facebook.