Since you are here, my guess is that you are considering financing your car but isn’t sure of the best place to secure financing. Persons looking to finance their cars can either do that from a bank, credit union, dealership or online. However, I’m going to answer the question of “how does a car loan work from a credit union” in this article.
What is a Credit Union?
Like banks, a credit union is also a financial institution, except that credit unions are nonprofit organizations owned by its members. These members are the ones that chooses the union board of directors through vote, no matter the amount of money one has invested.
They are also much smaller than commercial banks hence have more of a personal relationship with their members. This makes it possible for them to properly serve its customers with the best products or offers that is best for them.
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What credit unions do is to deliver services like the giving out of credit, savings and current accounts and other services just like banks do. Except that credit unions are nonprofits hence have lower loan rates, easier to secure loans, offer superior customer service etc.
Credit Union Car loan requirements
Membership
the first most important requirement is by being a member of the credit union you want the car loan from. This is because loans are only given out to members of the union and not open to just anyone. Some credit unions may require that you work with a certain organization, live in a particular location, and belong to a certain family, etc. before you can become a member.
Credit score
Another requirement for a credit union car loan is to have a good credit so they can be sure a borrower can really pay back the loan collected.
Paperwork
There may be some paperwork requirements such as income, employment situation, proof of residence, driver’s license etc.
Aside the requirements mentioned above, there definitely some more requirements that are specific to a credit union. Hence what you can do is to find out from your local credit union what the requirements for a car loan is/are.
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Now let’s go into the subject matter of “how does a car loan work from a credit union”?.
How Credit Union car loan works
As mentioned earlier, a Credit Union’s operations is similar to that of a commercial bank. However, Credit unions are a lot smaller, offer better customer service and it’s also a lot easier to secure a loan from a Credit Union.
Therefore, if you’re looking forward to financing your car, you want to consider finding out from your local credit whether you qualify for a car loan or not. Your credit score also matters when determining a borrower’s credit worthiness hence make sure you have a good credit before applying for a car loan.
You must first of all be a member of the union to stand a chance of being approved for a loan. Because it is owned by its own members, they take monies of its own members and give out to those who may need it in the form of loans for them to pay back with a little interest using the simple interest formula.
The loan application process is usually less complicated as compared to financing from a bank. What you simply have to do is to make the necessary enquiries, apply if you are okay with your findings. You are most definitely going to be required to provide proof of income to determine if you can indeed pay back the loan.
Additionally, you may be required to show proof of insurance. Once you qualify for a loan, your lender (credit union) will discuss the terms of the loan like payment schedule, interest rates, etc. with you. Ask questions if you are not clear about something.
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You can now sign the agreement to complete the loan application after which funds will be disbursed into your account or into that of the dealership.
Why you should consider a Credit Union Car Loan
Here are some reasons why you should consider financing your car at a credit union;
Easy to access
Securing an auto loan is much easier than from a bank provided you are a member of the union you’re applying at. Car loans is one of the main operations of a credit union.
Lower rates
Because credit unions are typically nonprofits, they offer loans at relatively lower rates compared to other lenders (banks, dealerships). This helps to make loans more affordable for members.
Customized deals
Credit Unions are able to give members customized deals that fits their situation. That way, they are able to offer better deals and conditions to persons with not so good credit. They are not as rigid as is the case with banks.
Great customer service
They offer one of the best customer service you can get as compared to the other sources of financing.
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FREQUENTLY ASKED QUESTIONS (FAQs)
Q1. Can I payoff my car loan early?
Yes! With Credit Union Car Loans, you can actually payoff your loan without any penalties like is the case with other lenders.
Q2. What is the loan term for Credit Union Car Loan?
Credit Union Car loan duration is basically between 3 to 5 years. Anything more than 7 years is not ideal. Note that the longer the loan term the higher the cost of the loan.
Q3. Who can apply for a Car Loan from a Credit Union?
Only members of a particular credit union can borrow from it. Hence to be able to secure a car loan from a credit union, you must first be a member.