Benefits of Going to a Credit Union for an Auto Loan

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

, - December 24, 2019

Credit unions can often offer better interest rates and an easier approval process than banks. If a borrower belongs to a credit union, they should consider going to it for an auto loan.

What’s a Credit Union?

Credit unions are direct lenders, and typically only offer car loans to their members. Many offer memberships to consumers that belong to a specific group, organization, or those living within a specific area.

Credit unions are smaller than banks. Because of this, they're generally more personal and offer more options tailored to a borrower's specific needs. National banks have strict processes in place, and they usually don't offer much in the way of leniency.

Credit unions are not-for-profit businesses – they exist to serve their members instead of maximize the amount of money they bring in. For this reason, they offer several benefits over for-profit banks, such as lower interest rates on loans and credit cards and better customer service.

Who Can Get Car Loans from a Credit Union?

You have to be a member of a credit union in order to get a car loan through one. It's typically easy to become a member. Eligibility often depends on where you live or work, or if you belong to a certain organization. You just have to find one where you meet the criteria.

Because of the exclusivity and non-profit status of credit unions, there are several benefits to taking out an auto loan through one. They may be able to offer lower interest rates than a bank or another type of online lender. Not to mention, their requirements may be less strict.

The personal nature of credit unions offers the potential for better approval odds. They may be more willing to work with borrowers with less than perfect credit if a relationship exists, and they may even be less strict when it comes to minimum loan amounts or the vehicle's age or mileage.

While loans are only offered to members, these benefits may make it worth your while to consider a credit union for your next car loan.

The Benefits of Credit Union Car Loans

When thinking about where to take out a new loan, there are three big benefits to using a credit union. Not only can these things help save money, they also make the loan process easier:

  • Lower interest rates – Bad credit borrowers tend to get higher than average interest rates on auto financing. Due to the non-profit nature of a credit union, however, interest rates are typically lower with a credit union compared to what a bank may offer. Unlike banks, credit unions are exempt from state and local taxes. This means they offer lower rates by reinvesting all their funds back into their consumer programs.
  • No fees – Credit unions are created to provide consumers with better financial services, so car loans they issue don’t normally carry service fees or minimum amounts. Since borrowers already have a checking or savings account, additional factors such as payment convenience make credit unions a good choice for handling all financial needs.
  • Protection – Credit unions offer loan protection insurance products, such as GAP insurance, credit life insurance, and credit accident insurance. These can help prevent a borrower from defaulting on their loan. GAP insurance pays your loan off after the event of a serious accident or theft. It takes the stress out of paying the loan, so you aren’t stuck making payments on a vehicle you no longer have or can drive.

The Bottom Line

If you have a history with a credit union, it’s a great idea to check with them first for financing your next auto loan. But, if you’ve been turned away because of poor credit, let CarsDirect help out.

We connect consumers to local dealerships that are capable of assisting buyers in many types of credit situations. Start the process by filling out our car loan request form today.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.

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