Whether you need a mortgage, credit cards, or personal loans for bad credit, the usual options are the mainstream banks and the credit unions. Deciding between the two is not always easy, and depends a lot on your personal circumstances. Most people who use credit unions are extremely satisfied with the services, and will recommend them at all times. Of course, that varies considerably, as you may or may not be able to join certain unions.
Comparing the Interest Rates
Naturally, when it comes to managing money, the first things people check are the interest rates. It’s always important to understand that the interest rate represents a significant portion of the total cost of a loan, but there are other fees and commissions to take into account as well, and these may drive up the costs considerably.
When it comes to long-term loans, banks tend to offer slightly lower interest rates, on average. For a 30-year mortgage with fixed rates, the average bank interest is 4.20%, while the average from credit unions is 4.29%. And, when you add up the results for the entire period of time, that 0.09% represents quite a hefty amount. But average numbers do not represent exactly what you will receive – the particular terms of you application vary depending on your credit score, the assets you own, your previous relationship with the lender, and so on.
For short-term deals, such as auto loans or personal loans for bad credit, credit unions are usually able to provide lower interest rates. On a 36-month loan for a used car, the average rate from a bank is 4.47%, while that from a credit union is just 3.7%.
Comparing the Services
Credit unions are not-for-profit organizations, owned by their respective members. In other words, they treat you as a member and stakeholder, not as a customer. Banks, on the other hand, are mainly interested in obtaining a profit by dealing with you, which changes the relationship completely.
Banks are still the mainstream choice these days, and they own more assets than credit unions. Because they target a wide customer base, they provide diverse services, and you can usually manage all your finances with one bank, without any problems. Credit unions are more focused, and tend to offer services tailored for their base membership. While the range is not so impressive, that also means that there are usually fewer hassles and complications when you need something from a union.
There is a common misconception that banks hold better insurance than credit unions. In fact, they are governed by the same rules, and member funds are insured by the National Credit Union Administration up to the same amount as bank deposits – $250,000.
Some of the smaller credit unions may not have a large network, or a lot of employees available to answer your questions, making access to their services relatively difficult. As the online transactions become more common and more secure, that aspect is set to change in the future, as all lenders will eventually provide 24/7 online services, without any doubt.
Darrell Hunt is a writer who is always researching the pros and cons of financial matters such as debt, credit card, loans for people with bad credit, mortgage, insurance etc to secure your financial future.