If you are looking for a car and need to finance your purchase, there are numerous options available. However, you may want to consider getting an auto loan from a credit union.
As the demand for new cars continues to rise, auto loans from credit unions also rise.
According to the Credit Union National Association, “Credit unions’ auto loans outstanding grew a tepid 1.3 percent in 2020 following 2.5 percent growth in 2019 and six years of double-digit increases from 2013 to 2018.”
This indicates that more people are acquiring auto loans from credit unions to buy new cars. If a lot of people use credit unions for auto loans, that implies that credit unions offer many benefits over other financial institutions when it comes to auto loans.
If you are looking for a new car, you should know how to get an auto loan from a credit union. Without this important knowledge, you will lose out on some excellent opportunities and benefits that a credit union can provide you with for purchasing a new vehicle.
To better assist you in getting an auto loan from a credit union, this article will give you the information you need to know about credit unions and how their auto loans work.
A credit union is a type of financial institution that offers services that are similar to those of commercial banks, such as depositing money, making withdrawals, offering credit, and providing other financial services. But, a credit union is a member-owned nonprofit financial cooperative.
The size of a credit union can depend on its members, ranging from small, volunteer-only operations to large organizations with thousands of participants across the country. Credit unions are established by corporations and other entities for their employees and members.
As a member-owned financial institution, a credit union offers auto loans to its members. In comparison to getting a loan from commercial banks, lenders, or dealerships, you will discover that getting a loan from a credit union offers great benefits that are centered on your particular needs.
Although the procedures for obtaining an auto loan from a credit union and other banks are similar, there are significant differences in the benefits. Credit unions provide advantages that other banks or lending institutions do not.
As a result of how the ownership of the institution is structured, credit union auto loans and bank auto loans differ primarily in how they offer their auto loan services. Credit unions are nonprofit corporations with the sole purpose of assisting their members.
Similar to banks, credit unions offer a wide range of financial services, including accepting deposits and making loans. However, credit unions, which are member-owned and cooperative organizations, offer a secure environment for saving and borrowing money at fair rates exclusively to its members.
Due to the difference in ownership of the institution’s structure, credit unions provide excellent service and overall flexibility because they are offering to members, not to customers. As a result, credit unions provide honest upfront rates and a range of auto loan options to help meet the needs of their members.
Credit unions have better service because they are serving and helping their members. According to Forbes, there are three main differences between credit unions and banks:
Indeed, credit unions and banks are different because of how they offer their services, and the biggest differences are the advantages of credit unions over banks.
Banks, dealerships, or lenders can allow you to buy a new car. However, the most crucial aspects of purchasing a new car are the terms of your auto loan and how you are going to pay for it.
If you’re in the market for a new car, here are some advantages that a credit union offers for your car loan that other banks and financial institutions can’t provide:
Banks and other financial institutions will claim that they are giving you a low-interest rate for your car loan. However, nothing can beat the low-interest rates offered by a credit union.
According to Business Insider, “The average new-car interest rate was 4.07 percent, and used-car rates averaged 8.62 percent in the first quarter of 2022.”
According to the Credit Union National Association, the average interest rate of a credit union car loan for new cars is 2.67 percent while for used cars is 2.84 percent.
There is a huge difference in the interest rate between banks and credit unions. If you are looking for a car loan, credit unions offer lower interest rates compared to banks and other financial institutions.
Being a member of a credit union has its benefits, one of which is the possibility that the institution will be more accommodating to customers with less-than-ideal credit. If you join a credit union and apply for a car loan, you might find that you have a higher chance of getting approved even if your credit is less-than-perfect.
It is given that loans need to have credit qualification and loan approval is higher when you have good credit. However, the requirements for car loans from a credit union might be less onerous; credit unions do not just concentrate on credit scores.
Credit unions take into account your history of credit use and how well you handle bill payments when reviewing your credit report. As a result, you will have a higher chance of getting a car loan approved with a credit union compared to banks that require strict credit qualifications.
It’s great if you have the resources to put a significant amount of money down on your car loan because it will result in a smaller overall debt burden. However, if you don’t have enough cash for a down payment, a credit union won’t mind.
In contrast to banks that might require a 10 to 20 percent down payment for car loans, a credit union will let you get your dream car with a lower down payment or even none at all. A credit union considers your needs and offers options to satisfy them.
The majority of banks won’t let you apply for a loan for a smaller amount if you have enough money to put a down payment on your dream car. Most U.S. banks have a $5,000 minimum loan amount, which is a comparatively high amount for both new and used cars.
Compared to banks, credit unions offer smaller minimum loan amounts. A low loan minimum can be advantageous if you have a sizable down payment and only need to finance a small fraction of your purchase.
If you are not purchasing an expensive car or you want to borrow a small amount of money to buy a cheap used car, a credit union is the best option.
There are always additional costs and fees associated with getting a car loan. Taxes, insurance, fines, and other charges rack up the fees. However, credit unions guarantee lower fees compared to banks and other lending and financing institutions.
Credit unions are designed to benefit their members, so you can get lower interest rates and fees on your car loan, especially late payment fees that can easily add up, which could be a financial killer.
If your situation is complicated to lend in, credit unions might be able to assist you. Since a credit union serves its members, it emphasizes excellent customer service to all members.
In a credit union, you are not just a customer, an application, or an account number; you are a person who is a part of the company. As a result, your interactions with the credit union are improved and your needs are prioritized.
Credit unions are nonprofit financial cooperatives that are owned by their members. Unlike banks, a credit union requires you to join before you can even open an account.
Any amount that members deposit can be used to fund loans or investments and the profits from these activities are returned to members in the form of lower loan rates or savings dividends. As a result, if a member wants to apply for a car loan, the money of other members is pooled and used to cover the car loan.
To put it simply, if you are getting an auto loan from a credit union, you are using the money of the other members for your car purchase. Given that it is still a loan, you will be paying for the interest rate, which is like a rental fee of the members’ money.
The income that the credit union gains from the interest rate will be given back to the members as interest rates from their deposits or in a form of lower interest rates if other members also want to apply for a loan.
Before you can apply for an auto loan from a credit union you need to do the following:
After being approved, you can now have your dream car with low-interest rates on your credit union car loan.
A credit union is one of the safest and most beneficial financial institutions available. Due to the strong sense of community it fosters, a credit union provides better benefits for car loans than a bank or other commercial financial institution.
Credit unions provide lower interest rates and fees, a higher approval rate, and a promise of excellent service throughout the entire car loan process. If you’re looking forward to getting your dream car with ease, your next step is becoming a member of a reliable and trusted credit union.
121 Financial Credit Union has been a pillar in Northeast Florida since 1935, supporting the development and prosperity of both its members and the local neighborhood. Contact us today and learn more about how to become a member and be part of a supportive community.