Getting a Car Loan with a Credit Union vs. Bank
When considering purchasing a used or new car, financing options are likely to land at the top of your list. As you go through the process of auto financing, look into borrowing from a credit union for customer-centered services and lower rates.
Who Offers Better Auto Loan Rates, a Credit Union or Bank?
Credit unions for many consumers are starting to become the go-to over banks when looking for auto loans. The reasoning behind this is credit unions are not-for-profit financial cooperatives dedicated to providing the best services at the lowest price possible for members. When credit unions, including ALLIANCE make money these financial resources are passed on to our members in the form of savings you see through our different loan rates and other offerings.
Banks differ from credit unions in that they often operate to make a profit. These financial institutions have shareholders they answer to who want the bank to generate significant earnings so they can receive higher returns on their investments. This added pressure from shareholders drives banks to offer profit-focused services rather than meeting customers' needs and expectations.
Getting your auto loan from a credit union comes with added benefits, such as being a credit union member. Membership in a credit union gives you partial ownership, allowing you the chance to influence decisions. If you receive an auto loan from a bank, there is no membership opportunity giving you less control over how the bank functions.
Credit unions only extend auto loans to members of their institution along with the added benefits of membership however, bank loans are available to anyone who can meet the bank's lending requirement. Keep in mind these fees and charges through the bank can be costly compared to getting your auto loan through a credit union.
The Benefit of Credit Union Auto Loans
If you choose a credit union for your auto loan, it is similar to getting a loan from another financial institution. If your application is approved, regular payments will be made over time until the total sum of the loan with interest is repaid. Credit unions differ in that the funds for your loan come from money deposited by members. Because of this, credit unions can be more flexible when creating loan terms since they do not depend on investors' financial resources.
An upside to taking out an auto loan with a credit union is that you'll likely receive lower interest rates than a bank. In September 2020, getting a five-year loan for a new car had a 4.96% APR from the bank compared to an average of just 3.18% APR for a similar loan from a credit union according to the National Credit Union Administration (NCUA). A car loan usually lasts several years. Making a slight difference in your interest rate can result in significant savings. If you receive a $25,000 loan, you will pay $720 less in interest at 3.18% APR from the credit union versus the 4.96% APR from the bank.
When looking more into the benefits of borrowing from a credit union, one crucial factor is that they typically offer lower lending limits. Lower limits can be beneficial if you are considering purchasing a used vehicle or have saved a large down payment that only requires you to borrow a small amount of money. In comparison, banks are hesitant about lending smaller amounts because they stand to make less money from these loans.
Credit unions are more supportive toward members as they exist to serve members' interests rather than generate profits. The fees and charges associated with credit unions are often lower than banks. Credit unions try to keep fees to a minimum. With a bank, you can expect to pay loan application fees and charges for checking accounts and credit cards.
Credit unions have built their reputation around getting to know the personal needs of members. Being based in the community allows ALLIANCE to respond directly to our member's needs in a way banks cannot. Ultimately, this makes your process of obtaining an auto loan and other financial services less intimidating and uncomplicated.
ALLIANCE Auto Loans
Here at ALLIANCE, we make the car buying process simple and would love to help put you in your dream vehicle. ALLIANCE allows you to shop for the car you are looking for without leaving the site through our auto-link platform. Click here to visit our auto loans page, where you can shop for a vehicle and apply for your auto loan today. Feel free to stop by any of our seven branch locations across Lubbock or call us today at 806-798-5554 to speak with our qualified staff.
