Financial advisors often recommend using credit unions for taking out loans, including car loans. Credit unions in Vermont are generally able to offer lower interest rates, fewer requirements for minimum loan size and generally better chances of being approved for those loans.
Let’s take a closer look at these benefits.
Credit unions are run as nonprofit organizations that put their profits back into benefits for their members, as opposed to banks, which are for-profit institutions designed to enrich their investors and shareholders. This is why credit unions are able to offer lower interest rates for loans than other types of lenders: because the profits all return to the customers. You might find auto loan rates a couple percentage points lower than the rates offered by standard banks.
In September 2020, the average APR for a new car loan for five years at a bank was 4.96 percent, compared to 3.18 percent for the average credit union. All other items being equal, that could result in hundreds of dollars or more in savings over the entire life of the loan. Check out our auto rates.
You have a better chance of being approved for a loan with a credit union than you do with a standard bank, especially if you do not have outstanding credit. Credit unions will go beyond the credit scores in their investigations of a person’s finances and capabilities to repay.
Again, this is in large part because credit unions are so focused on serving their members rather than their investors. They have the willingness and ability to assume a slightly higher level of risk in many circumstances.
Credit union members do not have nearly as many fees to worry about as customers of regular banks. Credit unions give back to their members in the form of lower interest rates, as well as reduced fees for deposit products and higher interest rates on savings accounts. Plus, you’ll have the opportunity to voice your opinions in how the credit union operates, which could influence some of the standards and methods they employ when dealing with auto loans.
Credit unions generally have lower minimum loan amounts than banks. This can be especially helpful if you need to purchase a car that is not very expensive, or if you have a large down payment and only intend to finance a small, minority portion of the purchase. This means you don’t have to take out a larger loan than you need to get the vehicle you want, which saves you a lot of money on interest in the long run as well.
To get an auto loan from a credit union, you might need to be a member. But if you’re not a member, you should be able to easily find a credit union in your area where you are eligible for membership.
When it comes to car loans, credit unions are often one of the best options available. Before you finance through a bank or your dealership, call your local credit unions to compare rates. Visit New England Federal Credit Union online or call us at 800.400.8790 for more information.