The United States has various institutions that provide financial services, ranging from large banks to small payday lenders. Of these options, the most overlooked is your local credit union.
Credit unions don’t usually have the same marketing budget as banks, and at first glance, banks might seem like the only option. However, local credit unions provide a range of services that provide residents with great rates and personalized service. Here’s what you need to know about the differences between banks and credit unions.
Structure of Traditional Banks
Traditional banks are for-profit institutions generally open to members of the public to invest in, but they sometimes have high minimums to open an account without any fees. They may also offer introductory rates that initially waive fees but will begin charging them after a set period or once the account value falls below a certain amount.
Although they pass some financial benefits like savings account interest to their customers, they usually have a more profit-driven model overall. They partly rely on outside investors and are obligated to try to maximize profits for these shareholders.
The ordinary account holders at banks have little say in the overall operation or priorities of the institution. Although there are federal laws governing banks to help protect customers, they do not fully protect customers from unfair bank policies. Customers are often left with no choice but to take their money elsewhere if they are not serving them well or have higher fees than expected.
What is a Credit Union?
A credit union is a financial institution with many of the same features and services as banks but with a nonprofit and member-controlled model. Instead of relying on a top-down management model without any meaningful member input or leadership, credit unions truly put members first.
Because of their nonprofit structure, credit unions can often charge lower rates and fees to qualified members. Since their mission is to serve members instead of outside shareholders, they focus on charging the minimum amount necessary to provide loans.
This also means that members have more say over the general direction and services of the credit union. Members periodically vote on the board of directors, which means that directors’ decisions are accountable to members.
Services Offered By Credit Unions
Credit unions offer many basic services like checking accounts and savings accounts, home refinancing, and much more. Instead of offering specialized investment accounts or dozens of credit card options, they specialize in the types of services that everyday families need. The exact amounts and terms vary, but they are usually competitive with what a bank can offer and may offer higher interest rates than national banks.
Auto loans, personal loans, and student loans are also available at most credit unions. Since credit unions know they have to remain competitive with banks, they offer multiple repayment terms for auto loans so you can decide what repayment schedule works best for your budget.
Credit unions may also offer debt consolidation and refinancing. This allows you to combine high-interest loans from other providers into one new monthly payment with a lower interest rate. This lifeline makes a huge difference for families who need to get out of debt but need time to make the necessary payments.
Small credit unions don’t usually have ATMs nationwide, which can seem like a deterrent if you travel a lot and want to avoid withdrawal fees. However, many credit unions partner with other credit unions to offer free withdrawals at a network of ATMs around the country. Between this option and the online bank services, you can count on your local credit union for major services.
Better Service and Local Knowledge
Credit unions provide excellent service to customers because they’re focused on your needs, not on profit. Loan officers and other staff won’t try to upsell you on a service you don’t need. They can take the time to walk you through the specific rates and loan amounts available.
Credit unions also understand local variables, including the housing market and other financial factors. They’ll be able to account for these when advising you on your next steps for mortgages, car loans, and other big financial decisions. If you go to a small credit union, you may even be able to talk to the same loan officer each time you need a new service.
Qualifying for a Credit Union
Some credit unions have strict conditions for membership, like being employed by a certain employer or being a military veteran. Others are for specific cities or regions. As long as you meet the basic criteria for joining, you can usually join with a minimal initial deposit.
Qualifying for individual services varies and often depends on your income and credit score. Low credit scores often cause customers to be rejected for loans at banks, especially loans like personal loans and student loans that aren’t backed by a tangible object. Generally, credit unions will try to approve a small loan at least to help you meet your needs while you rebuild your credit.
They’re also more likely to work with you to find a solution if your credit needs rebuilding before qualifying for larger loans like home refinancing. Secured loans are a great way to improve your credit score with minimal risk for the lender and can help you be eligible for more loans in the future. A credit union loan officer can walk you through your specific situation and explain if a secured loan is right for you.
Partnering With Your Local Credit Union
Even if you already have a primary bank account elsewhere, you can join your local credit union for loans, savings accounts, and other services a la carte. T&I Credit Union proudly serves the Detroit Metro area. All you have to do to qualify as a member is live, work, or worship in a seven-county area around Detroit.
We provide auto loans, mortgage refinancing, student loans, personal loans, and other critical services for families. We even work with families with low credit scores to help them access the funds they need to succeed. Call us today at (248) 397-9345 to learn more about how to become a member and joining a credit union.