What are the pros and cons of getting a car loan from a credit union?
I'm torn between getting a car loan from a credit union or a bank. What are the pros and cons of going with a credit union?
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Answered on Mar 08, 2021
Credit unions are excellent sources of all kinds of financing, including new and used car loans. When it comes to auto financing, there are a few factors that differentiate credit unions from banks, and this is where the pros and cons emerge:
For profit vs. nonprofit: Banks are profit-driven organizations. As such, they usually charge higher interest rates and fees for car loans. Credit unions are nonprofit organizations that pass on earnings to their members in the form of lower interest rates and fees for financing, including car loans.
Customers vs. members: At a bank, you are a customer. At a credit union, you are a member, and part-owner, of the organization. It may be set up by your employer, labor union, college, or some other group that comes together for investment and credit purposes. Credit unions may treat members better than banks treat their customers.
Strict lending guidelines vs. more flexible guidelines: Banks tend to have less forgiving lending criteria. Some of this is regulatory, some of this is economic, but all of it can make it more costly and difficult to get car loans from them. Credit unions are smaller and more localized, and they often include members with similar employers, jobs, or addresses. They may be more personal in their dealings with members, and thus they may be more flexible in approving car loans and negotiating interest rates and fees.
Advanced tech and scale vs. limited tech and scale: One possible drawback to getting your car loan from a credit union is that it may have less technology than what most banks offer, such as robust websites, live chat, etc. A credit union also has fewer branches, so if you need to make a visit, you may need to travel farther than with a bank.
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