25 Jan Should You Get an Auto Loan From a Credit Union?
Did you know that there are more than 5,600 credit unions in the US that are federally insured and waiting to help you with your financial needs?
If you are looking to finance a car, getting an auto loan from a credit union can help you save thousands with their considerably low-interest rates and additional perks. And, because there’s a credit union for every financial need, choosing the best rate can go a long way to account for some major savings.
So, yes, it is a wise choice to get an auto loan from a credit union. But how do you get one? Read on to find out.
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What Is a Credit Union?
At its most basic, a credit union works exactly like a bank. It offers financial services like loans, opening a bank account, etc. But what sets a credit union apart from a bank is that it’s a not-for-profit organization. Unlike banks, the primary emphasis of a credit union is to help people struggling with the financial crisis. So, rather than becoming a member, you become part owners of the credit union once you open an account.
And, because they do not work for profit, these organizations are willing to offer comparatively lower rates and additional perks like easy eligibility criteria and flexible guidelines.
Another reason to go for a credit union is that it is not answerable to investors. Instead, it is accountable to the members, and therefore, they look at your loan application more holistically.
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How Does an Auto Loan From a Credit Union Work?
Credit unions offer loans by pooling the member’s money. Because you become part owners of the union, the money pooled in is used for loans and help with other financial needs. Once the person pays back the loan, the interest earned is divided among the members in the form of dividends, lower interest rates, and higher saving rates.
The same goes for an auto loan. When a member takes an auto loan from the credit union, they are subjected to comparatively lower rates. Once the person pays back the entire loan, including the interest, the credit union earns profit in the form of the interest. This interest is then divided among the members in the form of low rates and even dividends.
Credit Union Car Loan Requirements
To get started with an auto loan from a credit union is pretty apparent- find a credit union and become a member. Opting for the loan as a current or former military member and spouse can help you get even lower rates.
Another thing you might want to note is that looking for a credit union in your community can help you claim additional benefits. Joining a military-friendly credit union will know your needs and will be willing to offer you the products suiting your needs.
The following major requirement is having a good credit score. While every credit union has its own notion of “good credit scores”, it is important to have a score of at least 640. If your score is a bit low, you can work on it by paying your bills on time, consolidating debt, or remembering not to max out the credit card.
However, if you are thinking of financing a car with a less than perfect credit score, you can ask a friend/family member who has a good credit score to cosign the loan application with you.
The next requirement that follows is having a steady income. While applying for the loan, you must show proof that you have a stable and reliable source of income that can help you cover up the monthly installments.
This proof of income can be in any form. It can be your bank statement, or you could also show pay stubs for the last 12 months. Some organizations might also ask for tax returns of at least two to five years.
Besides proving the source of your income, you would also need proof of your residence and identity. Proof of identity is generally required if you are new to the credit union.
Lastly, the organization will also require you to prove that you have auto insurance.
Moreover, you must note that the co-signer must be at least 18 years old to sign the loan application with you.
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Auto Loan Rates From Credit Unions
Auto loan rates differ from organization to organization and can also depend upon personal circumstances like credit scores, the downpayment you are offering, and the credit history.
Certain organizations like Pentagon Federal Credit Union offer rates as low as 0.99% and 1.99% for new and old cars, respectively. The most common loan term provided is for 36 months. The credit union also provides insurance discounts and mechanical breakdown protection.
If you have a bad credit score and still want to go for an auto loan, Consumers Credit Union is the best shot you got. Car loan rates start from 2.24% for a term of 60 months for the cars manufactured after 2019.
Known for its competitive rates, Navy Federal Credit Union starts its car loan rates from 1.79% for new cars at a loan term of 36 months. For late-model vehicles, the loan rates start from 2.19% and 3.79% for used cars. For old cars, the loan term can be extended up to 72 months. For new cars, the maximum extension in terms of the loan term you can get is 96 months.
In case you are looking for same-day approval, Alliant Credit Union has to be your first option. The union offers auto loan rates for a 60-month loan term at 1.94 % for new cars and 2.29% for old cars. The loan term can be extended up to 84 months.
Benefits of Getting a Loan From a Credit Union
Besides qualifying with extremely lower rates, there are a million other reasons why you should get an auto loan from a credit union. Here are some of them-
- Lower Loan Rates- Because credit unions are not-for-profit organizations, you can enjoy meager rates for not only auto loans but also credit cards or opening a checking account.
- Flexible Guidelines- Not only is it easy to qualify for an auto loan with credit unions but also, these unions are pretty forgiving. They are willing to consider your application even if you have a shaky credit score or not-so-good credit history.
- A Sense of Community- Joining a credit union can give you a chance to become a member of your community. If you are a member of a military credit union, you can get to meet your fellow service members and find companionship.
- It can Educate You- In case you are applying with a bad credit score, the organization can educate you about how to improve your scores and what to do to increase your credibility.
Is Getting an Auto Loan From a Credit Union Right for You?
Whether it is flexible guidelines, easy eligibility criteria, or lower loan rates, getting an auto loan from a credit union is always the right choice. In addition to getting lower rates, you can also get additional military discounts that can help save even more.