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How Do Auto Loans Work from Credit Unions?

Buying a new or used car is often the second largest purchase people make, right behind buying a home. However, with so many options, finding the right auto loan can be confusing. Dealership financing, banks, online lenders—everyone claims to have the best deals in town.

Credit unions offer a unique lending approach that makes them worth considering. As member-owned, nonprofit cooperatives, they provide financial solutions tailored to each person’s needs.

This translates to more personalized service, flexible terms, and competitive auto loan rates than large banks and other options. Read on to learn how to finance a car through a credit union.

How Does a Credit Union Car Loan Work?

Getting an auto loan from a credit union offers a unique experience compared to dealing with a large bank or dealership. While all credit unions share some similarities, each is unique and may offer different loan requirements, rates, terms, etc.

Overall, they typically provide more personalized service and flexibility compared to large bank or dealership financing. For example, Best Reward Federal Credit Union offers competitive auto loan rates with flexible 24-72 month terms.

Our lending team takes the time to understand your financial situation and goals to find the best loan option for you. We have an easy online application and pre-approval process so that you can secure financing quickly.

Once pre-approved, you'll know exactly what you can afford so you can focus your search and be in a strong negotiating position. We also provide useful tools like our Auto Buying Center to help you research vehicles and make informed decisions.

Several other factors set credit unions apart from traditional banks, online lenders, and car dealerships, so let’s take a look at them.

Members Are Not the Same as Customers

One of the lesser-known reasons to be a part of a credit union is that you are more than just a customer. Rather, you are a member of the credit union that is focused on serving its members, who are also the shareholders.

Unlike banks that must make profits for their shareholders, credit unions prioritize their members' best interests instead. Because of this unique structure, credit unions exist solely to serve their members and to provide a safe, convenient place to save and borrow money at competitive and reasonable rates.

Personalized Attention

Credit unions may be able to help you with more complex situations or hard-to-lend scenarios. For example, if you were to apply for an auto loan from a traditional bank, you would have to meet their credit requirements, employment requirements, and income rules.

At a credit union, there are still financial requirements. However, you also get personalized, one-on-one attention to meet your goals. In most cases, you can talk to your credit union lender online, over the phone, via email, or at a local branch.

The staff is readily accessible and will work with you to review options and help secure the best auto loan for your needs and budget.

Credit Qualifications

Every loan has credit qualifications. However, loans you obtain from a credit union may have less stringent requirements. Good credit is the best way to get a low-interest loan. Credit unions gather information from your credit report about how well you pay your bills as well as your history of credit use.

Income Requirements

If you are already with a credit union, they likely already know about your income history. Most credit unions require you to have steady employment to secure a loan.

Benefits of Credit Union Auto Loans

Aside from the details above, there are other advantages to obtaining an auto loan from a credit union before heading to the dealership. Securing your financing before walking into the dealership puts you in charge. You know exactly how much you can afford to spend, which puts you in a better position to bargain or walk away if you aren’t getting the right deal for you.

Interest Rates

Often, credit unions offer better interest rates. With borrowing, you should compare your options. However, you will often find credit union interest rates lower than rates you can get at the dealership or online through specialized lenders.

Many large lenders give auto dealerships incentives to write loans, with lenders often providing commissions to the dealership. This commission is paid through higher auto loan rates—and all hidden costs are passed along to you. 

While this practice is common when securing financing through a dealership or large lender, it is not something you will find at your local credit union.

What Makes Credit Union Auto Loans Different From Traditional Banks?

A credit union is a place to go when you want personal service and one-on-one attention. You can count on someone who lives and works in your community to be there, listening to your needs and goals and helping you make decisions that are right for you.

Credit unions are willing to work with you to get the best loan in your hands, but they are not driven by the biggest profit margins. The money you invest or borrow is just as protected as it would be at any other accredited financial institution. So, there is no additional risk in working with a credit union versus another type of lender or financial institution.

Looking for an Auto Loan? Get Pre-Approved Now!

Best Reward Federal Credit Union has never believed in second best. Our professional team is proud to offer superior auto financing services. We built our auto loan pre-approval process with our members in mind to provide a smooth experience for all. Plus, you can get pre-approved and shop in one convenient location.

Get Pre-Approved

If you’re wondering “how to get pre-approved for a car loan,” it’s actually very simple. Applying for an auto loan is no longer a lengthy or complicated process in today's digital world. Getting pre-approved streamlines the buying process and leaves your next vehicle just a few clicks away.

What Does Pre-Approved for a Car Loan Mean?

Pre-approval lets you know how much car you can afford, your estimated interest rate, and what you can expect for a monthly payment. Lenders base their pre-approval upon the financial information you provide and the results of a credit check.

The entire process doesn't take long, and you should receive a decision within a few days. Once you receive your pre-approval, you can narrow your vehicle search based on price. Dealers take your search more seriously when you show them your pre-approval letter. It’s usually just as influential to them as shopping with cash in hand.

Where Can I Get Pre-Approved for an Auto Loan?

You can get pre-approved at a bank, credit union, or dealership. However, if you’re considering dealership financing, it’s best to go into the process well-informed. Be on the lookout for hidden fees and other sneaky charges.

Benefits of Getting Pre-Approved for an Auto Loan

Getting pre-approved for an auto loan improves your car-buying process in several ways. Here are the most significant benefits you'll get from pre-approval.

You’ll Know Your Budget

With pre-approval, you’ll better understand the budget range for your vehicle and corresponding potential monthly payments. This knowledge narrows your search based on what you can afford. Getting pre-approved helps you avoid looking at vehicles outside your price range and keeps you from overextending your budget.

You’ll Save Time

Knowing your budget allows a focused search for vehicles that meet your needs and style preferences. Therefore, auto loan pre-approval drastically reduces the time needed to search and evaluate vehicle options.

You’ll Get Transparency

You’ll be able to gain better insight into several important factors when you get pre-approved for an auto loan. This includes term lengths, fees, and total interest. It also covers other essential factors that together form the complete picture of your loan.

Some lenders advertise promotions that look great until you examine them more closely. These “deals” may have hidden terms or conditions affecting the loan's cost. Understanding these details helps you avoid surprises and make a more informed decision.

You’ll Be More Competitive

Auto loan pre-approval gives you a leg up against other buyers who may be interested in the same vehicle. Private sellers and dealerships are more likely to be open to negotiations when they know you have the funding already taken care of. In other words, they’ll fast-track you to the front of the line, which is an enormous benefit in a tight auto market.

You’ll Be Better Equipped to Bypass Dealership Financing

Dealership financing will often cost you more than financing with a separate lender. The convenience of car shopping and financing onsite at the dealership may seem very tempting. However, getting pre-approved lets you understand your options better. This allows you to make the best choice without feeling pressured to finance at the car dealership.

You’ll Have the Power to Make the Best Decisions

If your pre-approval shows you can't get enough funds or the interest rate is too high for your budget, consider waiting to buy the vehicle. You can improve your credit score or take other steps to secure a better auto loan. Then, you can return to the process when you're ready.

3 Steps to Get Pre-Approved for a Credit Union Auto Loan

Getting pre-approved for an auto loan is simple and only takes a few minutes. Here’s how easy it is.

Step 1: Find the Right Financial Institution

It is essential to choose a trustworthy lender for an auto loan. Look for one that offers the best financial benefits and excellent service. If you inquire with multiple lenders, compare rates, incentives, and the loan’s APR to truly understand what the loan will cost you.

Step 2: Submit Relevant Information

Online auto loan applications are relatively simple to complete if you have the relevant information already collected. Most applications include fields regarding:

• Preliminary Information
• Loan Information
• Personal Information
• Employment & Income Information
• Debts

Once you have completed the application in its entirety, confirm your submission.

Step 3: Wait for Approval

Pre-approval will only take a few days at most. Loan officers will contact you to let you know whether or not they have approved your application.

Convenience of Applying for an Online Auto Loan

There are many reasons to consider applying for your next auto loan using an online portal.

  • Lenders can process an online auto loan application faster thanks to aggregating all relevant information into one area whereas auto loans applied for in person may require more time to complete.
  • You can apply for an online car loan at any time, from anywhere. A single device with an internet connection is all you need to complete and submit applications.

Benefits of Credit Union Online Auto Loans

Many lending institutions exist solely for auto loan financing. At least four different institutions offer auto financing options to consumers.

  • Car dealerships can offer auto loans in two ways. They can work as a middleman with an approved bank or provide financing directly through their company. This might be the most convenient option for many. Remember that dealership lenders often have steep fees and undesirable interest rates.
  • Banks may offer flexible pre-approval options. However, hefty late fees and sizable interest rates may disqualify them from many borrowers looking for the best deal.
  • Private lenders are less common but are still a viable financing option. However, missed payments or late transfers may result in interest rates that are too high to handle and could lead to severe financial damage.
  • In contrast to the above options, credit unions are the best choice for auto loans and refinancing. These member-owned financial institutions offer more competitive rates and provide excellent service.

Get the Best Credit Union Auto Loan

If you are considering buying a car, truck, boat, or other vehicle, your first step should be visiting your local credit union. If you’re not a member, you can quickly join and then secure a loan. The credit union’s lending team will work closely with you to determine how much of a vehicle you can afford to buy.

The entire process doesn’t take long, giving you more time to shop for the best option. The credit union will also help you purchase the vehicle from the dealership so that you can get behind the wheel within a few hours.

If you live or work in the greater Cleveland area and are looking for your next auto loan, contact Best Reward to find out how we can help you. Click below to view our loan options and competitive rates.

View Our Auto Loan Options & Low Rates