Getting a car loan from a credit union could mean faster loan approval, lower rates, and minimum application requirements. But is a car loan from a credit union the right choice for you? Let’s explore the benefits so you can make an informed decision.
Low Rate of Interest
Credit unions are non-profit organizations that reinvest their revenue in their members. As a result, credit unions are frequently able to offer lower rates to their members than other types of lenders. Let’s take a look at what that can entail for your bottom line. According to the National Credit Union Administration, the average bank APR for a new car loan with a five-year term was 4.96% as of September 2020, whereas the average credit union APR was 3.18%. If you financed a new $25,000 car for five years at 4.96% APR, your monthly payment would be $283. However, a five-year loan for the same automobile at 3.18% APR would cost you $271 each month. That may not appear to be a significant difference, but assuming all other loan terms were the same, the interest rate difference might save you around $724 over the life of the loan.
May Consider Factors Other than Your Credit Score
Credit unions may be more prepared to deal with members who have less-than-perfect credit, which is one of the benefits of a credit union membership. For instance, members who have a low credit score may be able to secure a decent rate if they have enough savings. Though some credit unions will handle creditworthiness in this manner, not all will. Nonetheless, as a credit union member, you may discover that you have a better chance of being approved even if you don’t have excellent credit.
Other Perks
Becoming a credit union member provides you with a number of advantages. Because credit unions are designed to benefit their members, you may be able to obtain reduced interest rates on your loans. You’ll also have a chance to influence how the credit union functions. Because credit unions are member-owned, you have the right to vote on issues that affect the credit union, such as who sits on the board.
