"Are credit unions a good place for a loan? I have very good credit and am planning on buying a vehicle and was told that credit unions offer a cheaper interest rate. How dependable are they?" -- Gwen Marie
I’ve been urging viewers to join credit unions since I started doing TV news 22 years ago. Here’s why:
According to the National Credit Union Administration, as of June 28 the average rate on a 36-month car loan was 2.85% at credit unions and 5.59% at banks. So banks are charging nearly twice as much for the same loan.
The rate differences on savings aren’t as great. But interest rates on 10 different types of accounts, from checking to five-year certificates of deposit, are higher on average at credit unions than banks, according to the same website.
According to the NCUA, the average credit card interest rate in June was 12.85% for bank-issued cards, compared with an average of 11.56% for cards issued by credit unions.
In addition, credit union credit cards tend to have lower fees and fewer of them.
While no lending institution is going to be careless with loans, community-based credit unions tend to be easier to deal with than megabanks. Lending decisions are more likely to be made locally with more flexibility.
In addition, while few national banks would make what’s called a “signature loan” — an unsecured loan guaranteed only by your signature — credit unions routinely offer this service to their members with good credit.
I recently applied online for a car loan from a local credit union without even becoming a member. The application wasn’t nearly as onerous as I had expected, I was approved in a matter of hours and, depending on whether I bought a used or new car, the rate offered was as low as 1.99%. (Should I actually take out the loan, however, I’d have to join the credit union, which simply means making a small deposit.)
You’d think that a small credit union without a million branches would be less convenient than a giant national bank. Not necessarily.
Credit unions have gone a long way toward making their online, phone and in-person services as easy as possible. Many credit unions belong to a shared branch cooperative that allows members of one credit union to conduct business at any other member credit union anywhere in the country — even overseas. And when it comes to finding the nearest participating credit union? Yes, there’s an app for that.
When it comes to banking fees, you’ll probably find better deals at credit unions than at the giant commercial banks. Whether you’re comparing fees to maintain a checking account, foreign ATM fees, or penalty fees for overdrawing your account, they’ll probably be lower.
I’ve gone to the same national bank branch for more than 10 years, and the people there are wonderful. I’d never suggest that any business automatically beats another when it comes to friendly employees. That being said, however, on those rare occasions when I needed to call my bank’s national customer service number to get a problem resolved — not fun.
Credit unions are typically smaller. Should you have a problem, odds are greater you’ll be talking to a live person sooner.
In the question above, Gwen Marie asks, “How dependable are they?”
Credit unions offer the same deposit guarantee offered by banks — up to $250,000. They’re not FDIC-insured. Instead, they have their own insurance fund. You can read more about the details of credit union deposit insurance in this article from TheStreet.com.
As far as “dependable,” while every business is different, credit unions are generally going to be as solid as banks. But it certainly never hurts to ask questions, like how long they’ve been in business and how many members they serve.
In days past, to join a credit union, you had to work at a specific company, or be a member of a specific organization or profession. Today? Not so much.
Laws still require credit unions to have a defined group of members, but that defined group can be pretty broad. For example, of the approximately 8,000 credit unions nationwide, about 25% are community-based. In other words, to qualify as a member, you only need to live in the same city or county as the credit union. In fact, you might not even need to actually live in the area. Working there or going to school there might be enough. Even being related to another member could qualify you.
In short, barriers to membership at some credit unions are about as high as the ones you’ll find at your neighborhood warehouse store.
You can search credit unions at a number of sites, including Find A Credit Union, CU Lookup and the Credit Union National Association site.
http://money.msn.com/saving-money-tips/post–7-reasons-credit-unions-are-better-than-banks
