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Updated on Friday, March 1, 2019
Credit unions can have lower APR auto loans than those offered by banks and dealerships. And more and more people are coming to realize this. According to Experian, credit unions grew their auto loan balances by 12% in 2018. They are nonprofits and consider borrowers as members of their organization rather than simply customers. Joining one is probably easier than you think.
Here we break down everything from how to find a credit union to what to do at the dealership once you have your credit union car loan.
Find the credit unions you could join
Credit unions have various qualifications for membership. The most common ones are based on where you live, work, worship or study or your family members’ professional or civic organizations.
The local area in which you live
A common qualification is that you live in a certain area. Golden 1 Credit Union, for example, simply says that anyone who lives in California may join. Other credit unions may say that you can join if you work, shop, do business or attend church within a certain area. The wording of this allows people who, say, live outside of a city’s limits but work there, to still qualify for membership at the credit union. For example, anyone who lives in Texas may qualify to join Credit Human, even though its membership guidelines say it is open to people living in certain parts of San Antonio.
Your profession or organization
If you are a member of a common profession, you may be able to join a credit union that caters to those types of workers. Here are some examples: Teachers Credit Union, Utilities Employees Credit Union and Police and Fire Federal Credit Union.
To figure out which credit unions you may qualify for based on this, you could ask your peers if they know of one. You could also looks for “credit union” and your profession or organization in a search browser or use the tools mentioned above.
A family member’s profession or organization
You may not even have to be in a profession or organization yourself to join a credit union catered to one. If a member of your immediate family is a member, you could probably become a member, too. For example, Navy Federal, one of the largest credit unions in the U.S., provides membership for U.S. military members, veterans, Department of Defense employees and immediate family members.
To figure out which credit unions you may qualify for based on a family member’s profession or organization, first find out what professions and organizations your family members are involved in. Then search for any pertaining credit unions — if a family member is already a member of such a credit union, that’s easy.
See what the credit unions offer
For all the credit unions you may qualify to be a member of, check out what they offer in regards to auto loans. Many credit unions have auto loan pages on their websites showing what type of auto loans they offer and their rates and terms.
Types of auto loans
Credit unions may offer auto loans for new and used vehicles, vehicles bought in private sales, an auto loan you would to refinance and lease buyouts. Make sure the credit union offers the type of auto loan you need.
Rates and terms
Make sure you compare apples to apples when you’re looking at auto loan APRs. An APR for a 24-month loan probably won’t be the same as an APR for a 72-month loan. Remember, you won’t know for sure what the credit union will offer you in an auto loan until you apply and receive its response.
Select and apply to the credit union(s)
Choose the credit union(s) that have the type of auto loan you need and the lowest APRs. If you are not already a member of the credit union, apply for membership online or in person — you may even be able to apply for an auto loan at the same time you apply for membership. Otherwise you may have to join as a member before applying for an auto loan from the credit union.
Here are some examples of current credit union auto loan rates.Navy Federal Credit Union
- New auto loan APR starting from 1.79%
- Used auto loan APR starting from 2.29%
- New auto loan APR starting from 2.99%
- Used auto loan APR starting from 3.34%
For the membership application, you should be prepared to provide personal information, including your name, date of birth, address, Social Security number, phone numbers, employer and occupation. You can also select what type of accounts or services you would like, such as various savings and checking accounts, a credit card or an ATM card.
At the dealership
If you are getting the vehicle from a dealership rather than a private sale, you’ll sign papers with the finance manager. Dealerships make a profit from arranging car loans in addition to the cars themselves. Ergo, they’d love for you to sign for a loan they arranged, not one you got directly. They may be pushy about running your credit and having you apply for a loan through them.
You could refuse and say you already have your preapproved loan. Or you could let them do it and see if they can beat the APR you got. They may be able to get you an even better deal from another credit union, a bank or an online lender.
Why not just tell the dealership to get a credit union loan for you?
While it is possible to get a credit union auto loan through a dealership, the average hidden interest dealers add to your APR is over 2%. If you don’t know the APR you deserve, you may be talked into a much higher one. It is always smart to get a preapproved auto loan offer directly from the lender you want.