Where to finance your car is another decision you have to make as a car buyer. With a lot of competitive rates offered around from various types of lenders, it’s just hard to take a pick.
However, Credit Union National Association vice president of economics and statistics Mike Schenk shared with U.S. News five reasons why car buyers should choose to finance their cars with a credit union over a commercial bank. They are the following:
1. Better Chance of Getting Approved
Schenk said that credit unions are “more likely to listen to your story than a commercial bank” when you have a bad credit. Credit unions can make adjustments when a lender in a bank couldn’t. Moreover, loan terms can be arranged according to your needs and capability to repay. There’s no significant difference between the loan approval processes in a bank and in a credit union but the latter is always considerate of their members.
2. Lower Interest Rates
It’s no doubt that credit unions almost always have the most competitive rates in the industry. Their rates are often lower than banks. According to rate comparison today by Informa Research Services, a financial research firm, the average rates for a 5-year new-car loan in credit unions and banks are 2.74% and 3.96%, respectively.
Opting to finance a $30,000 vehicle in a credit union with such rate applied translates to almost $785 in savings. With a higher interest rate, there is obviously more interest to pay for an auto loan in a bank.
3. Personalized Experience
Credit unions are non-profit organizations. That means they don’t lend money to their members to gain profit, unlike commercial banks. Credit unions are operated by volunteer members who do not act as how bank executives do. It is not also a surprise if some of the board members who are responsible for approving loans are friends of the borrower.
Because of this, you can enjoy a personalized experience in a credit union. You can be honest with your concerns and needs and even demand some adjustments to your loan structure. This eliminates the pressure you would feel with other lenders and gives you confidence that the union will try its best to help you.
4. Easy Access to Helpful Resources
According to Schenk, credit unions typically have a center dedicated to provide helpful resources to car buyers. This is where they can find more information about vehicle financing which can greatly help them in making informed decisions. This branch of the union can also help you calculate the real value of the car which can be different from what dealerships may declare, Schenk said.
5. No Sales-Driven Approach
Lenders in commercial banks are often compensated with incentives and profit shares. They get more of these when they close a deal. Credit unions, on the other hand, merely work for their members and do not seek any profit. This is one of the things that make credit unions largely different from banks and other lenders for that matter. The profit they get from their members flows back to them in the form of lower rates or flexible payment options.