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Is a Credit Union or Bank Best For Car Loans?


It’s time to buy a car, but how do you choose the right institution for your financing? 

From national banks to local credit unions, you have many options when it comes to obtaining an auto loan. Here, we’ll look at the factors to consider when deciding which credit union is best for car loans. 

Credit Union vs. Bank For Auto Loans

It may be helpful to understand the difference between these two types of financial institutions. 

Credit unions offer the same kind of services as banks, including auto loans, but they work differently because they are not-for-profit and owned by the people who have accounts with them. 

The differences in the way credit unions are owned and operated means that they typically offer lower rates and better service. 

While banks often have many branches in different cities and states, most credit unions may have fewer branches located in a smaller geographic area. To provide better access, credit unions work together so that their account holders can use branches across the country. 

To take out an auto loan with a credit union, you will need to become a member. That means you become one of the owners of the credit union. It also allows you to take advantage of all the other benefits they offer. 

Credit Union Auto Loans – Qualities To Consider 

When choosing a credit union for your auto loan, one of the factors you’ll need to consider is how good the credit union is overall. After all, in order to secure an auto loan, you’ll need to be a member of the credit union, and that means you’ll probably be making use of their other services too, such as checking and savings accounts.

Customer service

Most credit unions can boast better customer service than banks, but even then, not every credit union is created equal. As such, you want to make sure you get an institution that treats its members well. 
Find a credit union that is ready and able to assist you in securing the right auto loan for your needs.


The right credit union will be highly available, meaning you’ll be able to easily access their services. If you call, you should be helped quickly. Access to representatives through online chat can also be beneficial.


Of course, favorable rates are an important factor, especially when your purpose is to secure auto financing. 

Choose an institution that has low-interest rates on loans overall. Also, some institutions may be more favorable than others when it comes to those with less-than-ideal credit, so that may be worth considering as well.


Many credit unions offer extras on top of basic banking services. 

For instance, car loans through OUCU include a Skip a Pay service that allows borrowers to skip up to two payments per year with up to five skips for the entire loan. This is a great option since anyone could face unexpected expenses, such as doctor bills or sudden home repairs.

Auto Loan Terms To Consider 

Beyond the quality of the institution, you’ll want to consider the terms of the auto loan itself. 

Each credit union is different, and you’ll want to choose one that will provide the best terms possible.

Fees and penalties

One major factor is the types of fees you might have to pay on your auto loan. 

Some of the fees institutions often charge include:

  • Origination fees
  • Dealer document fees
  • Prepayment penalties
  • GAP insurance

If you can find an institution that doesn’t charge some of these fees, they’ll be worth considering.
With respect to GAP insurance, you’ll want to ensure you’re getting the best deal. Luckily, GAP insurance at a credit union can cost less and even give you more coverage than through a dealership or another financial institution. 

Interest rates

It’s in your best interest to compare auto loan rates. Some credit unions offer much lower rates on car loans than others, which can save you hundreds by the time you’re done paying off the loan. 

Low rates will also make it somewhat easier to make your monthly payments.

Loan length

For many borrowers, the length of the loan is a major consideration. Some want longer terms since it essentially means lower monthly payments. The downside is that it will mean more interest in the end (and often higher rates overall).
A shorter loan term will typically net you a slightly lower rate, but it will mean higher monthly payments, which can be a strain on the budget. 

If you have the means to make a higher car payment, though, it would be best to choose a shorter term since it will allow you to build equity on the car faster and avoid being upside down in the loan (i.e. owing more than the car is worth).

Deciding Which Credit Union Is Best For Car Loans  

Determining which credit union is best for car loans really boils down to your financial situation. 

If, for instance, you have high expenses and low income, you’d have an easier time qualifying for something with a longer repayment period, in which case you’ll have to find an institution that offers those terms.
Ultimately, it comes down to your unique circumstances, so be certain to evaluate your needs as you shop for the right auto loan.
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