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How Auto Loans from Credit Unions Work

August 31, 2020 | Vehicle Financing

When you're looking for a new vehicle, you have to consider how you're going to pay for it. The most common option is to get an auto loan, so you want to understand how auto loans work. Getting an auto loan requires that you select a lender - a credit union, dealership, online lender, or bank - and apply as you would for a personal loan or student loan. Many people on the market for a car choose to get a loan from a credit union. Keep reading to learn about the advantages of choosing a credit union, how the process works, and some crucial factors that can impact your auto loan. 


Benefits Of An Auto Loan From A Credit Union

There are numerous advantages associated with getting an auto loan from a credit union. Here are a few of the primary reasons that make credit unions a superb lender for most.

Members enjoy fantastic rates

To get a loan from a credit union, you must be a member. Members enjoy many benefits. As a member, you are a part-owner due to the credit union's not-for-profit designation; there are no shareholders focusing on “their” bottom line. When you become a member, you can benefit from great loan rates, savings dividends, and other value-added benefits.

More lenient qualifications

If you don't have a superb financial background or excellent credit, you might have better luck getting qualified for an auto loan from a lender like Red River Credit Union. Credit unions are generally smaller than other lenders which allows us to review each application individually instead of quickly passing them through a system that fails to take your full financial background into account.

Flexible purchasing options

When you get an auto loan from a credit union, you have more options regarding the type of vehicle you get and where you buy it. Red River Credit Union offers the standard new and used auto loan. But, you can also often secure a private seller loan and a loan for a less expensive vehicle.

Personalized member service

We pride ourselves on offering a high level of service to our members. When you're seen as a person, not an account number or application number, it makes every interaction you have with the credit union better.


Steps To Getting An Auto Loan From A Credit Union

If you want to experience the benefits of obtaining an auto loan from a credit union, here are the steps you need to take.

Apply online or in-person

Auto loan applications are usually available online for your convenience, but you can often complete the process in person or start the initial paperwork over the phone if you prefer. You can choose to get a preapproval, which allows you to complete the loan process before you go car searching. Otherwise, you can apply after you find the car you want. Getting a preapproval is recommended, so you have all of your financing information upfront. You can even shop around to find the best loan deal in advance. When you get a preapproval, you will be given your interest rate and the loan amount you qualify for, so you know the price range of the vehicle to look for once you start shopping.

Become a member

To use any of the credit union's products or services, you have to be a member. So, if you're not already, you want to submit your membership application with the credit union you're interested in getting a loan with. This is generally a simple process. Memberships are accepted based on an affiliation such as where you live, work, worship, attend school, etc. A $5 membership fee will apply.

Finalize your loan

Once you find the vehicle you want, it's time to finalize your loan. You might be asked to submit additional financial documentation or information regarding your car during the last step of your loan process. Red River Credit Union also offers eSign to sign your loan electronically, so you won’t have to visit a branch (some restrictions apply to eSign). Once this is done, the car is yours. Congratulations!


Factors Impacting Your Auto Loan

Before you get an auto loan from Red River Credit Union or elsewhere, there are a few factors that will affect your loan.

Credit score

Your credit score can significantly affect your ability to qualify for an auto loan and your interest rate. The higher your score is, the lower your interest rate will be, and the more beneficial your overall loan terms are. The opposite is true for a lower credit score. If you have time to wait before purchasing your next vehicle, pull your credit report, and see if there's anything you can do to improve your credit score before you apply. Improving your score even a little bit can save you lots of money over the life of your loan.

Your budget

Before you apply, you want to know what your budget is for a vehicle. Often, the first thing people want to know is how much they qualify for when the most important number is how much they can afford. Keep in mind that your lender might approve you for more than you feel comfortable spending. You have to take your budget, your financial goals, and your lifestyle goals into consideration when deciding how much to spend on a new car.

New vs. used car

Your decision to purchase a new or used vehicle can also impact your auto loan. Interest rates and loan terms can vary significantly based on this decision. In general, your interest rate will be higher when you purchase a used vehicle, and your loan term will be shorter. This is done to protect the interest of the lender. The opposite is true for a new car, so you get better rates and can stretch out your loan over a longer period.


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