How Credit Unions Can Save You Money on Loans and Mortgages

Credit Unions vs. Banks

Let’s start at the beginning: What is a credit union? In short, credit unions are not-for-profit financial institutions run by the banking members themselves, in contrast to for-profit banks run by boards of executives and shareholders. 

Credit unions provide many of the same services as traditional banks, including checking, savings, credit cards, CDs, and online banking. Here are three key differences between credit unions and banks:

1. Ownership

The value of credit unions stems from who owns them. Traditional banks are run by a board of executives, elected by shareholders, who make decisions on policies and fees from a distance. For many, it’s just a business with one main goal: Make a profit. 

Credit unions are the exact opposite. They are run by banking members just like you and me. Credit unions are more concerned with favorable policies, low fees, and creating a feeling of community for their members. 

2. Profits

Traditional banks are focused on turning a profit, with policies geared toward yielding more money for the bank and its shareholders. 

On the other hand, credit unions are not-for-profit institutions. Thanks to this structure, credit unions typically offer better fees and rates for their members. That's precisely why credit unions have lower fees for loans and mortgages, as well as more manageable costs across the board, such as fewer penalties and service fees. 

3. Customer Service

You've likely been at the mercy of a traditional bank's customer service at one point or another, and it's no picnic. The customer service from big banking institutions feels more like bank service, doing little to support banking members and prioritizing the bank's interests. 

For credit unions, member interests are their interests. Aside from being friendly and easy to reach, credit union customer service tends to be more sympathetic to member requests. 

Advantages of Credit Unions Over Banks

Still not convinced that joining your local credit union is the way to save? Here's a breakdown of how and why credit union loans and mortgages benefit borrowers. 

Best loan rates

As not-for-profits, credit unions are not oriented toward maximizing profits for the institution. More often than not, you'll find they offer the best loan rates. For the borrower, lower interest rates equate to less out-of-pocket money. This is doubly important for long-term loans, where compound interest accrues over time. 

Like traditional banks, credit unions offer different types of loans, including personal loans, business loans, auto loans, and credit builder loans. Credit unions also offer payday alternative loans, or PALs, standardized by the National Credit Union Association.

Moreover, because credit unions aren't focused on maximizing shareholder profits, they're more likely to approve a loan for people with poor credit scores. Credit unions still review these loans on a case-by-case basis, but in general, those with subpar credit will have better luck at a credit union than a big bank. 

Best mortgage rates

Credit unions offer the best mortgage rates, too. And the reasoning is the same: The not-for-profit credit union structure. In contrast, charging higher mortgage rates is a go-to move to boost profits at big banks. 

With mortgages, the most important figures are interest rates. Mortgages usually last 15-30 years. That’s a lot of time for interest to accrue, and even a slightly lower interest rate can mean huge savings over the long run. 

Additionally, most credit unions offer the same mortgage options as big banks, allowing you to choose the best structure for your needs. Credit union mortgage options include:

• Fixed-rate mortgages. The interest rate does not change over time but is generally higher than introductory or adjustable-rate loans. 
  
• Adjustable-rate mortgages (ARMs). The interest rate changes at predetermined intervals, either up or down. This allows some maneuverability to changing economic conditions. 
  
• First-time homebuyer programs. These are designed specifically for those unfamiliar with owning a home or property, especially with low down payments. 
  
• Mortgage refinancing options. Refinancing a mortgage means replacing it with a new mortgage with better terms. This is especially useful if your first mortgage came from a traditional bank with less-desirable terms. 

Benefits of Credit Unions

To sum up, credit unions are known for their lower fees and rates compared to traditional banking institutions. But low credit union loans and mortgage rates aren’t the only appeal. Credit unions are more forgiving of lower credit scores, providing opportunities to people that big banks won’t consider. As not-for-profits, credit unions also won’t try to sneak in extra fees. 

If you’re looking for more community involvement, more personalized partnerships, better customer service, and more lenient terms and conditions, look to your local credit union. 

Further Resources on How Credit Unions Can Save You Money

Want to know more about credit union lower fees for loans and mortgages? Here are some additional resources to keep you well-informed: 

• Compare interest rates for yourself. Take a look at the latest numbers on credit union and bank interest rates. 
  
• Be inspired. Real-life homebuyers share tips on how they saved for a mortgage. 
  
• Calculate your potential costs. There are several different loan calculators available through MyCreditUnion.gov to help you plan.

Choose the Credit Union Experience

When you read the numbers, credit unions almost always have more favorable terms. Lower rates, fewer fees, higher returns on savings, less strict penalties — that’s just the beginning of the credit union story. They may not be as flashy as big banks, but credit unions will leave you with more of your own money in your pocket. Now that’s a happy ending.

To see what credit union loans and mortgages can do for you, use our Credit Union Locator Tool to find one close to your home. 

Did You Know?

Credit union loans and mortgages have lower fees and interest rates than big banks. That's because credit unions are not-for-profit and only charge the minimum needed to cover costs. While big banks charge extra to turn a profit, credit unions only charge what's necessary so you can hold on to your own money.