How Do Credit Union Personal Loan Rates Differ From Traditional Banks

Getting a credit union personal loan might be to your advantage when compared to the loans that are offered at traditional banks. The interest rate on your personal loan will undoubtedly play a large role in your decision of which type of lender to work with. Here are a few things to consider about how personal loan rates with credit unions differ from traditional banks.

Interest Rate Differences

In most cases, you are going to find a lower interest rates with credit unions than you would with traditional lenders. Most of the time you will be able to save anywhere from .5% to 1% on your annual percentage rate for a personal loan. While this might not seem like much, when you calculate it out over the life of the loan, this can be a substantial amount of money. Even a fraction of a percent could eventually add up to hundreds or thousands of dollars being saved. Therefore, you need to take advantage of every discount that you can get when shopping for a personal loan.

Becoming a Member

Credit unions are run differently than traditional banks. With a credit union, the individuals that hold accounts with the credit union are actually considered to be the owners of the facility. Because of this, all of the profit that is generated by the credit union is distributed back into the accounts of the members. For this reason, you can actually get even more of a discount by opening a checking account with the credit union that gave you loan. Many times, credit unions will offer another .25% to .5% off of the interest rate on your loan if you will open an account with them and have the monthly payment deducted from the account. This provides the credit union with a level of control over your payment and makes it more likely that you will make your payments.

Why Rates Are Lower

Credit unions have lower interest rates on all of their loans because of a functional difference in the way that they are set up. Credit unions are considered to be nonprofit organizations. With this distinction, they do not have to pay taxes to the federal government. This means that they will save a substantial amount of money on an annual basis compared to traditional lenders. They are then able to pass this tax savings along to their customers in the form of lower interest rates on loans. You will also find that the fees that they charge for various functions tend to be lower as well.

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