It’s no secret that financial institutions are always in a race to offer the best rates on loans and attract more customers. But with so many financial institutions claiming to have the “best” rates, it can be hard to know what a good credit union loan interest rate actually looks like. Plus, how do you differentiate between those offering actual great rates versus those luring in customers with clever marketing tactics?
Navigating the sea of options to find the right credit union loan can be tricky — but we’re here to help! In this blog, we’ll dive into the details of what makes a good credit union loan interest rate and provide insider information on how to find the right one that suits your needs.
Let’s Talk Credit Union Loan Interest Rates
A credit union’s interest rate depends on a wide range of factors, including the economy, type of account, and deposit amount. However, credit unions are known to offer more competitive loan interest rates compared with traditional financial institutions.
According to recent data from Bankrate, the average interest rate on a 60-month new car loan from a credit union is 6.55%, while the average interest rate on a 30-year fixed-rate mortgage is 6.97%. Keep in mind that these rates can vary by the credit union, your individual credit score, and your overall financial situation.
Is It Better to Get a Loan From a Credit Union or a Bank?
Your individual needs will ultimately determine whether it’s best to secure a loan from a bank or a credit union. However, there are a few key factors that might impact your decision.
Interest Rates
Generally, credit unions offer lower interest rates on loans than banks due to their not-for-profit structure. Because they are owned by their members, credit unions have lower overhead costs and can pass those savings on to their members in the form of lower rates.
A lower interest rate can save you thousands of dollars over the life of a loan. For example, a 1% difference in interest rates on a $50,000 loan over five years can result in savings of over $2,000. This is why it’s important to compare interest rates between banks and credit unions to find the best possible deal.
Fees
Because of their not-for-profit structure, credit unions also tend to provide more favorable terms and fees to their members, including lower fees on loans. It’s important to ask about all of the potential fees associated with a loan before determining if it’s right for you. Common credit union loan fees include:
- Application fee — The fee charged to process your potential loan application.
- Origination fee — The fee charged to create the loan. This is often the percentage of the total loan amount.
- Late payment fee — The fee charged if you make a payment after the due date.
- Prepayment penalty — The fee charged if you pay off the loan early.
- Annual fee — The fee charged every year that you have the loan – this is typically financed into your loan.
By factoring in all of these potential fees, you can make a more informed decision to find a credit union loan for your needs.
Loan Terms
The terms of a loan refer to the length of time given to repay the loan, as well as the interest rate and any fees associated with the loan. The main difference between bank and credit union loan terms is that credit unions tend to offer more flexible and borrower-friendly terms than banks.
Eligibility
When it comes to loan eligibility, banks typically have stricter requirements than credit unions because they prioritize profitability and minimizing risk. This means that they may require a higher credit score, a longer credit history, and a higher income level in order to qualify for a loan.
On the other hand, credit unions prioritize serving their members and may be more willing to work with an individual with a less-than-perfect credit score or a lower income level. They also may offer special loan programs for specific groups, like veterans or first-time homebuyers, that have more lenient eligibility requirements.
Think Pink
As a not-for-profit financial cooperative, our mission is to prioritize the needs of our members over profits. With lower overhead costs and a community-driven approach, we’re proud to pass along savings to our members in the form of better loan interest rates and lower fees.
Don’t just take our word for it — see for yourself! Discover the difference that City & County Credit Union can make for your financial future. Our friendly and knowledgeable staff is ready to discuss your financial needs and help find the loan that’s right for you.
