Why you should get your car loan at a credit union Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by offering you interactive tools and financial calculators, publishing original and objective content. We also allow users to conduct research and compare information for free to help you make informed financial decisions. Bankrate has agreements with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site are from companies that compensate us. This compensation can affect the way and when products are featured on the site, such as, for example, the order in which they may be listed within the categories of listing, except where prohibited by law for our mortgage, home equity and other home loan products. This compensation, however, does have no impact on the content we publish or the reviews that you read on this site. We do not cover the vast array of companies or financial offers that may be accessible to you. Emma Turner/Shutterstock.com
5 min read Published March 02, 2023
Written by Meaghan Hunt Written by Personal finance contributor Meaghan Hunt, a researcher, writer, and editor across disciplines, with a love of personal finance topics. After more than a decade working in public libraries and writing, she now edits, and studies as freelancer full-time. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping their readers to control their finances by providing precise, well-studied and well-researched data that breaks down complicated topics into manageable bites. The Bankrate promise
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Credit unions offer more borrower perks than some banks are positioned to rival. Lower interest rate, a community presence, and a borrower-focused business model set credit unions apart.
6 reasons to get a credit union car loan If you’re looking for your next vehicle, think about the following benefits of obtaining an auto loan at a credit union. 1. Low interest rates, unlike most bank, credit unions can offer lower rates due to the fact that they’re not for profit. Consequently, they are seeing an exponential rise in car loan originations. “Typically, the lending rate (at the credit unions) is extremely competitive when compared to other lenders in the majority of conditions,” says Bill Meyer who was a former director of public relations manager and content manager at CU Direct, which connects credit unions and auto dealers across the nation. In the last quarter of 2022, the interest rate on a five-year new automobile loan through a credit union was 4.74 percent, according to the NCUA. For banks, it was 5.53 percent. When you borrow $30,000 to purchase automobile and the credit union is able to save you $327 on interest throughout the term of your loan. 2. Community ties, personalized service The process for taking out a car loan isn’t much different between bank and credit union. But if you have a lower credit score it is possible that you will be able to qualify for an auto loan with a credit union versus banks. “Credit unions are likely to offer more flexibility in the underwriting process,” says Mike Schenk Vice President of Research and policy analysis for the Credit Union National Association (CUNA) which is a trade organization. The credit union is also likely to cooperate with you in the event that you go through the rough spots and require more time to make a payment. “You have a story that is unique and your story is much greater chance of being heard by an institution like a credit union. At big financial institutions, you’re more likely to encounter underwriting that’s written in stone and carried out in some corporate office a couple of states away. Visit an institution like a credit union, and you’re more likely engage in a discussion.” 3. User-friendly loan process Long gone are the days when you had to go to a branch in order to apply for an auto loan. Many credit unions are now letting you apply online, on the phone, or . If you are applying for financing at a dealer, “invariably, the dealer will refer you to credit union financing and an institution that you could become a member of,” Schenk says, “so it’s a simple procedure.” But, you should before visiting the dealership. Not all dealerships work with credit unions, and if you are able to become a member and be able to get the best rate you work directly with the credit union. In addition, you’ll be offered a competitive loan offer when you start buying a car — and you won’t be required to pay a markup from the dealer on your rate. 4. Credit unions have many other advantages. Members, and not shareholders, own credit unions and any profits they make go back to members in the form of dividends. Credit unions can also transfer the profits to their customers through greater rates on deposit accounts and on loan products, like 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 over 40,000 outlets. Credit unions are focused on educating their members and educating them on how they will be able to receive advice on the best financial choices for your particular situation. “Credit unions are full-service with the same products that banks offer. They’re structured differently which means that they provide significant benefits for the members of credit unions,” Schenk says. The focus on members could result in a more precise discussion about your financial status before the credit union approves or denies your loan. Credit unions might be more understanding and flexible than traditional banks when it comes to the decision to lend. 5. Becoming a member is easy There are those who believe credit unions are available only to employees of an industry, company or government agency, and that those who are not part of a group can’t join. Meyer claims that this is no longer the case. “Most credit unions are now allowing anybody to become a member.” CUNA has credit unions that have community charters, which permit them to serve greater geographic regions. If you seek a credit union near you, visit and type in your ZIP code. “It would be shocking to see a person who was not able to access a credit union,” Schenk says. 6. Car loans make up a large portion of the work that credit unions perform. Don’t be surprised if an auto dealer refers customers to credit institution prior to you even go to a bank. Credit unions for used and new cars alike increased year-over-year in 17.9 per cent and 19 in each case, as per 2022 . Credit unions held $166.8 billion of loan balances for brand new cars at the end of the third quarter of 2022 and $305.3 billion for used cars. How do I apply for an auto credit from a credit union loan? The process of financing a car with the credit union is comparable with other lending institutions, with the exception the membership requirement. Once you qualify as an enrolled member, you may apply for a car loan on the internet, by phone or at a branch, depending upon the particular credit union. A majority of credit unions review the following information to determine your eligibility for an auto loan The information you provide about yourself. Your employment and income information. Your employment and income information . The vehicle identification number (VIN) and mileage for the car you wish to purchase. You must provide proof of insurance to the credit union as part of the application process. Note that although you may be able join and apply for an auto loan the on the same day, certain credit unions will make you wait a month or two before you can apply. What are the main differences between a dealership, bank and credit union car loan? The major difference between a bank or the credit union car loan is the financing terms. Some banks offer discounts particularly in the case of a long-term relationship, a solid payment history and a . Credit unions as well as banks may offer incentives like an autopay discount if you’re a current customer. But because credit unions are not-for profit organizations and are owned by their members, you are able to get better rates and reduced fees compared to for-profit banks that have shareholders who own. When you get a car loan it is because the loan originates from a third party financial entity. Dealers are paid to connect you to any of their finance partners. Due to this, you may have better options than the interest rate that you receive from 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 the customer — you’ll have to sort it out by yourself. If you are looking to purchase an used or new car there are a variety of options for financing. If you’re a member of a credit union, you might have access to low interest rates and lower costs compared to big banks or dealership loans. The application process is identical after you’ve joined and the benefits could assist you in getting approval, especially if your credit score isn’t the greatest credit score.
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Written by the Personal finance contributor Meaghan Hunt, a researcher, writer, and editor across disciplines , with a love for personal finance topics. After 10 years of work in libraries that were open to the public and writing, she currently edits, writes, and researches as a full-time freelancer. Edited by Rhys Subitch Edited by Auto loans Editor Rhys has been writing and editing for Bankrate since late 2021. They are enthusiastic about helping readers gain the confidence to control their finances by providing concise, well-studied and well-researched content that breaks down otherwise complex topics into digestible chunks.
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