Should I Take Out a Loan with a Bank or a Credit Union?
Whether you want to consolidate debt, work on your home, or pay for a substantial and unexpected expense, you’ll need to find the right financial institution for opening a loan account. For both personal loans as well as other types of borrowing, such as mortgages and auto loans, most people face two options. They could head to a major financial institution and speak to a loan officer, or they could visit a credit union. Which solution will offer a clearer path to better results? A detailed look at the pros and cons of each side is necessary to determine an answer.
What Do Big Banks Offer Loan Seekers?
Is there ever a time when you should go to a larger bank for a loan first? If you already have an open account with a bank, you may find the process is easier and has fewer hurdles than if you did not. It may be the “path of least resistance” to opening a loan account, as you must join a credit union and become a member to use their services. Highly specialized loans or those who need a substantial amount may also find commercial banking solutions to suit their needs.
However, you will often pay more over the course of a loan with a big bank, and winning approval is not always easy. As for-profit corporations, these banks must carefully evaluate risk before agreeing to take on a loan. If your credit score is low or you do not meet the bank’s narrow criteria for borrowing, you may find it very difficult to secure funding.
Credit Unions vs Banks: Who Helps Those with Rough Credit?
Achieving a stable financial position is an admirable goal, but one that life often intervenes to disrupt. As a result, many people live with credit scores below what the banks consider to be “good credit.” That closes many financial doors, and often means receiving denial after denial when seeking a loan. With credit unions, that is often a different story.
While credit unions must still evaluate risk responsibly before extending a loan, profit is not their motive. Instead, the goal of a credit union is simple: make contributions for the greater good of all members. This pledge includes providing greater flexibility to members in need. If you have a patchy credit history or a score that only falls within the “fair” range, you may find a credit union more receptive to your loan application.
Interest Rates: Who Comes Out on Top More Often?
Interest is the big concern for all borrowers — how much more will you owe in addition to the loan principal over the course of the loan? When considering the answer to that question concerning credit unions vs banks, the fiscal goal of each organization comes into play yet again. Banks are more likely to charge you a higher interest rate, especially in relation to your credit score. On the other hand, a credit union only needs to cover its costs and generate value for its members. That different perspective leads to typically lower rates and more affordable loans, a strong point in favor of credit union membership.
Service and Support During Your Loan Period Matters
During the life of your loan, you may have questions, concerns about interest rates, or even a need to defer payments temporarily. When making your decision about where to seek a loan, consider the importance of good customer service. With large banks, loan officers often manage many hundreds of different accounts, and finding attentive service that suits your schedule may prove a challenge. Credit unions, on the other hand, are more accessible by virtue of their smaller operational footprint. Always look into a financial institution’s reputation before choosing to bank with them.
Pay Fewer Fees with the Right Credit Union Partner
Remember how banks are out to make money? You’ll find their loans come with more strings attached and more fees that drive up the overall cost of your loan. Especially for those looking for a loan to consolidate their debt, such terms aren’t very friendly. Credit unions typically have lower fees overall, especially for late payments, while bank policies trend towards the punitive side of the spectrum.
Are There Any Drawbacks to Using a Credit Union?
Credit unions aren’t necessarily a perfect solution, but their focus on individuals puts them in stark contrast to the biggest names in banking. What should you know before you commit to this choice, though? Be aware that credit unions often have fewer locations than banks, and they typically may not service customers every day of the week. Some credit unions have a reputation for being less technologically advanced than major banks, but that disparity is increasingly small.
Explore Your Loan Options with Resource One Credit Union Today
With more accessible, personal service and a focus on providing loan rates that better fit your financial needs, credit unions are an excellent resource for the average person seeking a loan. At Resource One Credit Union, we’re focused on serving the best interests of our members in everything we do. That commitment includes straightforward loans with transparent terms and affordable interest rates. Whether you want to build credit or improve your financial position, we’re here to help. Visit one of our branches to speak to a loan officer, contact us today for further information, or find out more about our loan options now.