Buying your dream car has become a lot easier with the increasing availability of various financing options, especially auto loans. However, choosing the right auto loan provider can be a tough decision.
While several buyers choose dealer financing, most people trust traditional banks or credit unions for car loans. If you are wondering what would be the right choice for you, here is what you need to know.
What Makes a Credit Union Different from a Bank?
Since both financial institutions offer similar financial services, it is easy to confuse one with the other. However, there are some major differences between credit unions and banks that most people don’t know. To find the right auto loan provider, you must know what makes a credit union different from a bank.
While you get services like savings accounts, credit cards, mortgages, and loans from both these options, there is a significant difference in their ownerships. Unlike banks, credit unions are owned and operated by their members and is a non-profit organization. When you become a credit union member, you get ownership of the institution.
A credit union pools the money from all its members and uses that to offer financial products at better fees and rates than what the for-profit banks have to offer.
How are Auto Loans from a Credit Union Different from Bank Auto Loans?
You may have seen how traditional banks often advertise promotional rates for car loans to boost their business. While those deals may sound lucrative, you can secure similar deals with almost every bank if your credit score is excellent and your finances look good on paper. On the other hand, credit union auto loans have the following advantages over bank auto loans.
- Lower Interest Rates:
Since member-owned and not-for-profit, credit unions can offer auto loans at lower interest rates than most traditional banks. They are also exempt from several taxes profit lenders need to pay. So, you can save some money on this.
- Credit Qualifications:
It is hard to get loans from traditional banks when you do not have a good credit history. Credit unions, however, are often willing to work with members with less-than-perfect credit. They are most likely to consider individual circumstances and make certain modifications to their loan products to meet your needs.
- Customer Support:
While traditional banks also have a customer service team to help their customers with various banking-related issues, credit unions are known to offer superior customer support. Since you also become a member of the credit union while utilizing its services, you share the same values and interests as the employees working at the credit union (who are often members, too).
It is quite evident that auto loans from credit unions are more beneficial than bank auto loans. However, you should always do some research yourself and make your own decision that suits your financing needs.
Things You Need to Secure an Auto Loan
Both banks and credit unions follow similar procedures while approving a car loan. They usually look for certain indicators to confirm that you are trustworthy and can afford to repay the loan. You will have to submit the following while requesting for a loan:
- Identity Proof:
You need to provide government identification, such as a driver’s license or passport, to prove that the person applying for the loan is you.
- Income Proof:
Arrange your monthly paychecks or salary slips, documents supporting your employment status, and any assets you own to present as proof of income.
- Credit History:
A lender will need your address, date of birth, and your Social Security Number (SSN) to fetch your credit report.
- Proof of Residence:
You need to find a piece of personalized mail, such as a credit card statement or a utility bill, as your residence proof. The lender will assess these documents to know if you rent or own a home and how long you have lived at your current address.
Conclusion
Traditional banks and credit unions both offer similar financial services with a few major differences in the way they operate. Compare the interest rates and other major details of their loan offerings to choose the right option. Happy financing!