Bank Loans Vs. Credit Union Loans
The biggest purchases in a persons life are typically a car, a house or other recreational vehicle. Big purchases such as these usually require large sums of money which can only be obtained either through saving after a long period of time or taking out a loan. What immediately comes to mind is taking a loan out from a bank, but many people don’t know that they can also take a loan out from a credit union.
When taking a loan out from a bank there are a lot of things to consider. Many of the well known banking chains that criss-cross the country require good to perfect credit ratings before consumers can take out a loan. The interest rates on the loans are always higher than those of a credit union because if a banking customer defaults on a loan the U.S. government can assist in pursuing the recapture of the debt or the items purchased with the loan. Mortgage loans come in two main varieties; fixed and adjusted rate, which span ten, twenty or thirty years with various repayment options.
Credit unions on the other hand offer the common man a better opportunity to build credit by taking out a loan with them. These loans are advantageous as the interest rates are significantly lower than they are at most banks making it more affordable people with tight budgets and/ or fixed incomes to pay back the loans. Another feature of the lower interest rates here is that consumers have shortened loan repayment periods and thus are able to save thousands to hundreds of thousands of dollars over the lifetime of the loan. Repayment options include biweekly and other mon- traditional methods to further decrease the amount owed and shorten the loan period. Because credit unions are actually owned and controlled in part by its members or customers credit unions are not as regulated or regulated in the same way as banks are. Ergo, credit unions are locally owned and operated by its members where banks are owned and controlled by large conglomerates and the U.S. government.
For all these reasons, getting a loan from a credit union rather than a bank is better because it forces the members to be responsible for their own finances. A credit union can’t get the kind of backing or bail out a bank can, and thus relies heavily on its members to pay their debts and pay them promptly. More importantly members who are late with their paents even once or default on their loan(s) are not allowed to take out any other loans or lines of credit for at least ten years. Because each credit union is different, these rules of business might vary where you live. Credit unions do not require that it’s members bank with them, only that they open a checking or savings account with as little as five dollars and keep it open as long as they have a loan there.