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 tools and financial calculators as well as publishing impartial and original content, by enabling you to conduct your own research and compare information for free to help you make sound financial decisions. Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are advertised on this website are provided by companies that compensate us. This compensation could affect how and when products appear on this site, including such things as the order in which they may appear within the listing categories and other categories, unless prohibited by law for our mortgage home equity, mortgage and other home loan products. This compensation, however, does have no impact on the information we provide, or the reviews you read on this site. We do not contain the universe of companies or financial deals that might be available to you. Emma Turner/Shutterstock.com
5 minutes read Read March 02, 2023.
Written by Meaghan Hunt. Written by personal Finance Contributor Meaghan Hunt, a researcher, writer and editor in a variety of disciplines with a passion for personal finance issues. After 10 years of work in public libraries and writing, she now edits, and conducts research as a full-time freelancer. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers to manage their finances by providing concise, well-studied information that breaks down otherwise complex subjects into bite-sized pieces. The Bankrate promises
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Credit unions are able to offer greater borrower perks than some banks are positioned to compete with. 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 in the market for your next car, consider the following benefits of obtaining an auto loan at the credit union. 1. Low interest rates, unlike most banks, credit unions may provide lower rates since they're not a profit-making institution. Therefore, they're experiencing exponential growth in car loan originations. "Typically, the rate of lending (at the credit unions) is extremely competitive when compared to other lenders under most situations," says Bill Meyer, former director of public relations and content manager for CU Direct, which connects credit unions to auto dealers across the nation. In the final quarter of 2022, the rate for a five-year new vehicle loan at a credit union averaged 4.74 percent according to the NCUA. At banks they were 5.53 percent. If you're borrowing $30,000 to finance automobile and the credit union is able to save you $327 on interest over the life of your loan. 2. Community ties, personalized service The process of getting an auto loan isn't that different between bank and credit union. However, if you have an unsatisfactory credit score it is possible that you will be able to qualify for an auto loan with an institution like a credit union instead of a bank. "Credit unions will likely have more flexibility in their underwriting processes," 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 work with you in the event that you go through an upswing and require longer to complete a payment. "You have a unique story and your story is much greater chance of being heard at the credit union. In large financial institutions they are more likely to experience underwriting that is written in stone and carried out at a corporate headquarters a few states away. Visit an institution like a credit union, and you're likely to engage in a discussion." 3. An easy loan process Long gone are the days when you had visiting a branch to get an auto loan. Most credit unions now let you apply online, on the phone, or . If you are applying for financing at a dealership, "invariably, the dealer may direct you to credit union financing and the credit union that you can become a member of," Schenk says, "so it's really an easy process." Still it is recommended to do your research prior to visiting the dealership. There are a few dealerships that collaborate with credit unions and if you're able to become a member, you will likely be able to get the best rate working directly with the credit union. Plus, you will already receive a favorable loan offer when you start buying a car and won't need to pay for dealer markup on your rate. 4. Credit unions also have other benefits Members, not shareholders, own credit unions, and any profits they make go back to the members in dividends. Credit unions can also transfer the profits to their customers through greater rates on deposit accounts and on loan products, including auto loans. Most credit unions also participate in a shared branch and ATM network. Schenk states that CUNA's members are part of an ATM network shared by over 40,000 outlets. Credit unions are focused on providing education to their members, too, so you will be able to receive advice on the best financial choices to suit your needs. "Credit unions offer full-service offering the same financial products that banks offer. They're just structured differently, which means that they provide significant advantages for members of credit unions," Schenk says. This focus on the member could result in a more precise discussion about your financial status before the credit union decides whether or not to approve or refuses your loan. Credit unions may be more understanding and accommodating than traditional banks when it comes to the decision to lend. 5. Membership is simple. Many believe that credit unions are only open to people who work for an industry, company or government organization, and that any person who is not part of a group can't join. Meyer claims that this is no longer the case. "Most credit unions allow anybody to become a member." CUNA has credit unions with community charters which enable them to service greater geographic areas. If you are looking for an institution near you, visit and type in your zip number. "It would be shocking to see a person that didn't have access an institution of credit," Schenk says. 6. Car loans make up a large portion of the work that credit unions perform. Don't be surprised when an auto dealer recommends you to a credit union before you even go to a bank. Credit union for both used and new vehicles alike grew year-over-year in 17.9 percent and 19 percent and 19 percent, respectively, according to 2022 . Credit unions held $166.8 billion of loan balances for brand new cars at the end in the 3rd quarter 2022. They also had $305.3 billion in used vehicles. How can I apply for an auto loan? A car loan with a credit union is the same to other lenders, except the membership requirement. When you're an enrolled member, you may apply for a car loan online, over the telephone or in an office, depending of the institution. Most credit unions will review the following to determine your eligibility to get an auto loan The information you provide about yourself. Your income and employment information. Your . The VIN number for your vehicle. (VIN) and mileage for the car you wish to purchase. Make sure you show proof of insurance the credit union during the application process. Also, while you might be able to enroll and request an auto loan on the same day, some credit unions require you to wait for a month or two before you apply. What are the main differences between a bank, dealer and credit union car loan? The main distinction between a bank and the credit union car loan is the terms of financing. Some banks offer discounts particularly if you have a solid relationship, good payment history and a . Both banks and credit unions may offer incentives like an autopay discount if you're a current customer. But because credit unions are not-for profit organizations and run by members, you are able to enjoy better rates and less charges compared with for-profit banks, which shareholders own. When you apply for a car loan and you are approved, the loan originates from a third party financial institution. Dealers get paid to match you up with the financing partner of one. This means that you may have better alternatives to the rate that you receive from the dealership versus the interest rates offered by a credit union or bank. Plus, if there is any issue with the finance company, the dealer won't help you -- you will have to sort it out your own. The main thing to remember is that when you purchase a new or used car there are a variety of options for financing. If you're a member of the credit union you could be able to enjoy lower rates of interest and costs compared to big banks and dealership loans. The process for applying is the same once you've gained membership, and the benefits may help you get approved, especially when you don't have the best credit score.
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Written by the 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 libraries for public libraries She is now writing, editing and conducts research as a full-time freelancer. 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 confidence to control their finances through providing clear, well-researched information that breaks down otherwise complex topics into manageable bites.
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