Experience the Benefits of Getting Your Auto Loan at a Credit Union
A vehicle is a necessity for many Americans. U.S. car buyers purchased 16.5 million new automobiles in 2014, and many millions more used ones.
If you’re in the market for a new — or just new-to-you — car, you might be looking forward to picking it out, and not exactly looking forward to paying for it. But financial institutions, such as Austin Telco Federal Credit Union, can take much of the hassle out of the car-financing process.
A credit union might not be the first place that comes to mind when you’re considering auto loan sources. You might be planning to apply at a big bank instead, or expecting to take what the dealership offers you. But more Americans are recognizing the reasons to consider credit union loans.
In the second quarter of 2015, credit unions issued nearly 17% of all auto loans in the U.S., according to a report by the credit bureau Experian. And almost a quarter of used-car buyers sought financing through credit unions, the same as the number of used-car buyers who went through finance companies and three times as many as went through “captive” lenders.
This considerable slice of buyers has several good reasons for auto loan shopping through credit unions.
Credit unions are nonprofit institutions that are owned by and exist to serve their members, not stockholders. Because of this, credit unions don’t have to be as concerned about the profit they make from each transaction as much as for-profit institutions.
This usually means lower interest rates. The National Credit Union Association rounds up average rates for common loans and products at banks and credit unions once each quarter, and in almost every case in the September 2015 survey, credit unions offered better deals. For example, banks charged an average interest rate of 4.62% on 48-month new car loans and an average of 5.14% on 48-month used car loans. Among credit unions, those rates averaged 2.57% and 2.76%, respectively.
A more personal touch
Credit unions’ operational model also means that their representatives can be more flexible when approving loans — a huge plus for applicants with less-than-perfect credit. A large bank, processing a volume of applications, might look at no more than your credit score when deciding whether or not to issue you a loan, whereas a credit union can take a more holistic look at your finances.
Help along the way
Credit unions often provide resources to guide borrowers through the loan process. These can clarify the steps involved in getting a loan, as well as loan rates and what they mean, and often appear as a learning center on a credit union’s website.
There are many benefits of credit union loans, compared with that of banks — but when it comes to auto loans, the differences are especially clear. You’re likely to feel respected and supported when you go to a credit union for car financing, not to mention that you’ll usually save money.
Lynn Mucken, NerdWallet
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