Almost all American families have to borrow money at some point in their lives. Home mortgages, student loans, car loans, and other basic types of loans are a common stepping stone for building wealth.
Personal loans can play another important role in your financial health, especially if you have a family. Dealing with sudden expenses without the help of a loan can put a significant strain on your day-to-day life. In serious cases, you could even end up months behind on bills or unable to pay for a sudden medical expense.
Getting a personal loan is a significant decision, as personal loan interest rates and fees can vary dramatically. Banks and credit unions are viable options for loans, but banks may have less favorable terms and conditions for you. Before filling out a loan application, learn about the advantages of using a credit union instead.
The Downsides of Banks
Like most businesses, banks are for-profit institutions and focus on making money for themselves. The stakes increase even more if a bank is publicly held, which legally obligates it to generate money for shareholders. Customers have very little say in how a bank operates, so it’s difficult to ensure your money is supporting an ethical business.
Although banks offer a wide range of services to attract and keep customers, they rarely offer the best deal for your money. They sometimes offer special discounts or promotions, but these are usually short-lived once they’ve roped you in as a customer.
Banks also save their best account types and promotional deals for long-time customers with large accounts. Even having excellent credit for families with average incomes won’t get the rates and promotional offers featured on bank advertisements.
Online lenders and other small for-profit lenders may seem like a better option, but they also may charge high interest rates to turn a profit. However, there are non-profit financial institutions all over America that make it easier for you to get the best deal possible on your loan.
Credit unions are nonprofit financial institutions that are controlled by an elected board of members. Because of this, the board and the policies they create support members. Their policies must follow the National Credit Union Administration rules, a federal agency charged with overseeing credit unions nationwide.
Although the credit union still has to charge fees and interest to cover operating expenses and stay fiscally sound, they are not concerned with creating profit. They are also insured similarly to big banks, which helps protect your savings accounts.
Credit unions are typically local or regional organizations and usually don’t offer huge business loans the way big banks can. However, for everyday families seeking personal loans, student loans, or car loans, credit unions’ customer-focused nature makes a tremendous difference to their financial goals. They can also respond more quickly to customer ideas and concerns because they don’t have to deal with a large bureaucracy.
Lower Interest Rates
Because of their nonprofit status, credit unions can usually offer lower fees and interest rates than traditional banks. Although the specifics vary depending on credit score, loan term, and loan amount, your Annual Percentage Rate (APR) may be lower.
Loans with longer repayment terms always have higher interest rates. If you need a longer repayment term to keep your monthly payments manageable, a credit union will put the effort in to keep the interest rates as low as possible.
Sometimes, the credit union’s interest rate may be similar to or even slightly higher than a bank’s advertised rate. However, some banks make up for this by sneaking in a larger one-time origination fee. A credit union clearly lays out your fees, interest rate, and overall total for your loan so you can make an informed decision.
Different Loan Types
Payday lenders and online lenders usually only offer a few types of personal loans. Most credit unions, including T&I Credit Union, offer Life Loans to cover small one-time costs and Signature Loans in larger amounts.
Student loans are another potential area where credit union loans can help your family. Student loans often have much lower interest rates and higher limits than typical personal loans, so it’s important to take advantage of them when you need them. However, they are still considered a personal loan because they are unsecured instead of being tied to your house or car.
T&I Credit Union also offers credit cards, which puts your personal line of credit into a portable and easy-to-use form. Your card loan limit can be up to $10,000, depending on your income and credit history.
If you need a personal loan, your credit history may be an obstacle at some banks. Even if you have good credit, anything less than excellent credit may make it difficult to get an unsecured personal loan.
A credit union discusses factors in your credit report, such as high credit card debt, that may be impacting your ability to get a loan. In some cases, you may qualify for a home equity line of credit or a similarly secured loan, even if you don’t qualify for an unsecured personal loan yet.
You can also get a co-signer on your loan to get better terms and interest rates. In many cases, a family member or close family friend with good financial health and an excellent credit score will be eligible to serve as your co-signer.
Options for Rebuilding Credit
Credit unions also offer options for rebuilding your credit score if your current credit history is weak. One of the best ways to rebuild credit fast is by taking out a Share Secured Loan secured by your savings account at the credit union.
Opening a Share Secured Loan gives the credit union peace of mind that you’ll be able to repay the loan, which keeps your interest rates lower. You also get the added benefit of having a repayment record on your credit history, which improves your creditworthiness in the eyes of all potential lenders.
Better Customer Service
The local and personal nature of credit unions also means they can offer better customer service. Local credit union officers and locally controlled boards naturally have a better understanding of market conditions and factors affecting area families.
A local credit union can provide customized suggestions and advice based on their knowledge of your community. Since factors like housing and gas costs vary from state to state and even from city to city, your monthly costs of living and the amount of loan repayment you can afford may be dramatically different from someone with the same income in another state.
You can also access online resources through your credit union to improve your overall financial literacy. Getting familiar with everyday financial topics can help you pay off your loan on-time and plan for the future.
Credit unions can also help you brainstorm additional services that can help you reach your financial goals. Many credit unions can help you consolidate debt into a lower monthly payment to manage your budget better. Refinancing existing debt into a new personal loan can make an enormous difference if you’re struggling with significant credit card or medical debts.
Getting Your Services From the Same Place
It’s best to get as many of your financial services from the same credit union. That way, you can consistently work with the same team of professionals who get to know you and your goals. By choosing a credit union with plenty of local services, you’ll be on your way to a financially healthier lifestyle.
T&I Credit Union serves the Greater Detroit area and offers membership to anyone in a seven-county area. We provide families with home, auto, personal, and student loans and even offer loans for your RV or watercraft. We also offer savings, retirement, and business accounts, so you’re ready for anything that comes in life.
We make it easy to reach us by phone or online, so you always have your financial information at your fingertips. Contact us today at (248) 397-9471 for more information about membership and how we can help you meet your financial goals.