Bank vs. Credit Union Car Loans

If you are in the market for a new or used vehicle and need help with your car finance, be sure to examine credit union car loans before going straight to your bank for assistance. With so many loan options and auto loan lenders to choose from, it can be easy to make the mistake of assuming that they are all more or less the same. However, this is not the case and there are some key differences between banks and credit unions that you should be aware of before take out a loan.

First, it is important to understand the difference between a commercial bank and a credit union. Banks are owned by shareholders, and work towards increasing the profits of their shareholders. On the other hand, credit unions are non-profit organizations and are owned by members of their union. So when you join a credit union you are essentially buying a small stake of a bank with your return on investment being lower interest rates.

Lower car loan rates are probably the biggest incentive to borrow from a credit union as opposed to a bank. If you have all of your credit transactions consolidated with one bank, they may be able to offer you a better rate, but in general credit unions have lower interest rates across the board. Banks will sometimes try to convince you that borrowing from a credit union is risky due to the lack of FDIC protection. However, many credit unions are covered by FDIC, and all one needs to do to find out is call the credit union in question and ask if they are insured.

Another reason why some people choose to borrow from a credit union is because of the personalized service they can offer. If you are banking with a large commercial bank, it is likely that you will have to deal with 1-800 numbers, and sometimes poorly informed customer service reps. Since credit unions are smaller in nature, they tend to be friendlier to their customers and have fewer but better informed employees at your service. One of the downsides of choosing a credit union is that they typically have fewer automatic banking options than a large commercial bank would offer you. So if this is something that is important to for you, you may want to stay with you bank.

Credit unions are known for being more lenient and friendly with first time borrowers, so if you are looking to build up your credit then this could be a good place to start. Certain factors such as your credit rating, the amount you are willing pay on a down payment, the vehicle in question's age and mileage, and your employment stability will all factor into what kind of deals you can get.

Overall, your best bet is to just shop around and find the loan that works best for you. Credit union loans are a valid option, and should be considered before simply settling on borrowing from your bank.