Posted on: 9 February 2022
Credit Union and bank loans may seem very similar, but they aren't exactly the same. Here we'll take a look at how these two loan types are different and what type of loan is best for you.
What is a Credit Union?
Credit unions are member-owned, non-profit institutions that exist to serve their customers; banks are investor-owned businesses looking to make a profit. Because of this fundamental difference, you'll find important distinctions between the two types of loans.
From the outside, a credit union and a bank may seem very similar. And the process is going to be similar when applying to each. The difference really resides in who is making the decisions.
Credit Union Loans vs. Bank Loans: What's the Difference?
The biggest difference between a credit union loan and a bank loan is who's approving them. Credit unions usually don't have a standardized set of requirements that every borrower must meet in order to qualify for a loan. These rules can vary depending on which branch you're applying to. Banks, on the other hand, need to have a set of standardized guidelines which they have to maintain for all locations.
Standardized guidelines mean that you might not be able to qualify even if you've experienced extraordinary issues, such as debt from medical problems. The lender won't be able to waive requirements for you, so there's nothing that you can do.
Are There Any Downsides to Credit Unions?
With credit unions, there can be a lack of standardization. Even if two borrowers have completely identical financial profiles, they may not get offered the same loan from the same institution because there isn't a set of guidelines that need to be followed. But that can actually be a benefit for many people.
Because credit unions can also be a bit unpredictable, you need to shop around. They may have rates that diverge more significantly than banks because of that lack of standardization, but that also means that you can get some great deals.
Getting a Loan at a Credit Union
Because all credit unions are unique, you should walk into one and talk to a loan officer. They will tell you what you need to know about getting a loan. You will be able to find out what documents they need to approve you, what their general requirements are, and whether you should even spend your time pursuing it.
If you've already been turned down at a bank, consider credit union loans instead.Share