There are many advantages to borrowing money from a credit union, including better rates, terms, and payment flexibility than could be found with other lenders. Credit union members who find themselves needing money often discover that the best loan rates available are offered through the credit union. In fact, the favorable interest rates and often simple approval process for a credit union loan is one of the main reasons why people become credit union members in the first place.
One of the characteristic features of a credit union is that it is member-owned, and usually operates as a not-for-profit corporation. In a credit union, each person with an account owns a share of the union as a whole: they are participants, not customers in the traditional sense. The goal of most credit unions is to offer dependable, community-based financial services to a small group of similarly situated individuals. This narrow focus and small base typically allows for more competitive loans and loan rates than would be available at a comparable bank or other financial institution.
Credit union loan rates are typically the biggest advantage of borrowing from a credit union. Unions are not usually trying to profit from the loan the way a bank might. Of course, a credit union will have to charge some interest in order to cover basic account maintenance fees and to keep operations running, but most make it a goal to keep rates as low as practically possible. Depending on the amount of a loan and its duration, a low interest rate can make a significant impact on the total amount owed.
Many credit union loan customers also cite customer service as one of the greatest advantages. In a credit union, members are often treated as the equals of the loan staff and union managers. Because credit unions are typically made up of such small groups of people, many participants report feeling like they are actually known by their credit union.
Often times, this relationship can lead to personal loan approval even if a borrower has a less-than-perfect credit history. A person who has been a part of a credit union for some time and is known to have consistently made payments, kept a positive balance, or otherwise treated personal finance accounts responsibly may be able to secure a favorable credit union loan, while he might be turned away from a bank. Banks are typically much more stringent about credit risk factors and credit scoring policies, which often precludes some people from receiving loans. The same is not always true at credit unions.
A credit union loan is usually only available to members, which is in contrast to most banks. Most credit unions have relatively limited admissions criteria, usually centered around profession, employer, or geographic location. People frequently apply to join credit unions for the sole purpose of securing a credit union personal loan or small business loan, but membership does not always come automatically.