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Buying a Car? 3 Reasons to Finance with a Local Credit Union

When it comes to financing a vehicle, you might be tempted to take whatever financing deal is offered by the dealership, or by a traditional bank you may have worked with in the past. But while the financing deals offered by these lenders may be attractive on the surface, buyers shouldn't agree to any financing offers until they check with their local credit union.

Whether you're an existing credit union member or are considering this type of institution for the first time, credit unions can offer some distinct advantages that other lenders often aren't able to match. Here are three big reasons why it can pay to request an auto financing quote from your local credit union.

1. Lower interest rates

finance car 1Because credit unions reinvest their profits into their members, they aren't focused on maximizing profit margins the same way a traditional lender is looking to generate revenue. As a result, credit unions can often offer competitive rates that beat the offers from traditional banks and dealership financing departments.1

"In addition to better interest rates, your credit union may also offer lower fees on the auto loan than what you'll find through other lenders," says Brad Scheidt, EVP and Chief Finance and Strategy Officer. "This delivers savings to the borrower both in the short term, as well as over the long run."

2. A personalized customer service experience

To take out an auto loan with a credit union, you will have to become a member of that institution. While there are often many ways to qualify for membership at a credit union, the end result is often a more personalized banking experience than what you may be accustomed to.2

Credit unions prioritize member service and support over the organization's profits, which means you're more likely to receive personalized customer service that improves your borrowing experience. It can also lead to more flexible borrowing terms: If you're struggling to get a good financing offer elsewhere, a strong history as a member of your credit union might be accounted for when deciding whether to fund your auto loan.

3. Lower minimum-loan amounts

finance car 2At some financial institutions, small loan amounts for vehicle purchases may be turned down. This is because those smaller loans involve a lot of processing and loan origination relative to the total revenue they generate, which turns those loans into a poor source of profits—and may convince some lenders to set a higher minimum loan amount.

"If you only require a small loan to finance your car purchase, credit unions will likely be more willing to work with you," says Scheidt. "And because those credit unions view the loan as a service provided to members rather than a revenue-generating product, you won't feel like the lender is choosing between their profits and their service to you as a customer."

If you've never used a credit union to finance a vehicle or other type of loan, it's worth your time to get a rate quote and find out whether this lending option can save you money and stress as you pursue your next vehicle.


Sources:

1. https://www.creditkarma.com/auto/i/credit-union-car-loan

2. https://cars.usnews.com/cars-trucks/credit-union-car-loans

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