How hard is it to get a car loan from a credit union

Everything You Need to Know About Credit Union Auto Loans

Are you gearing up to buy a car? The first step is to take stock of your financing options.

Recent data shows that 46% of Americans finance their cars, 36% buy them outright, and 21% decide to lease. Most people who buy a car choose to finance their purchase with a loan.

Should you get your auto loan from a credit union or from a bank? What are the advantages of each option? Let’s find out.

What is a credit union?

Credit unions are cooperative, member-owned financial institutions. In other words, they are created and operated by their members, rather than by shareholders. Those members/owners share the profits.

Typically, you can join a credit union by paying a low, one-time fee or if you belong to a certain community or organization.

Read this for an in-depth review of the top 50 credit unions in the U.S.

How hard is it to get a car loan from a credit union?

Credit unions can have several advantages over banks. Because they’re not as profit-oriented, they often offer better rates and terms on an auto loan from a credit union. Of course, this depends on the union’s size and capabilities.

Community-based credit unions can also be more helpful in working with you to get approved for a loan. They’re also willing to look at a wider variety of factors than just your credit score.

What key factors do credit unions consider when granting an auto loan?

Joe Pendergast, VP of Consumer Lending for Navy Federal Credit Union, the largest credit union in the U.S., says that a lender will typically look at these key factors:

  • Credit score.
  • Credit history.
  • Employment history.
  • Amount financed.
  • Debt-to-income ratio. 
  • Duration of the loan.

Pendergast says, “As a credit union, our goal is to provide affordable financing and ensure the monthly payment fits within the member’s budget.”

As a credit union, our goal is to provide affordable financing and ensure the monthly payment fits within the member’s budget.”

Ahmed Campbell, Vice President of Credit Operations at Municipal Credit Union (MCU) concurs with Pendergast. He adds that MCU also considers these factors:

  • The collateral being financed.
  • The year/make of the car and whether it is new or used.
  • The person’s borrowing history. Are you first-time borrower, or have you financed before?

Campbell adds, “However, there is no definitive floor on any of these factors. MCU looks at the full member picture before deciding whether to grant an auto loan.”

Looking to improve your credit score in order to secure more attractive loan terms? Check out these tips.

How much can a customer expect to borrow for an auto loan?

Pendergast says you should expect to borrow only what you need to finance your car purchase.

“In addition to the price of the vehicle, there are additional costs such as tax, title, and tags. Outside of the loan amount, it’s also important to take into consideration what gas, maintenance, and insurance will cost you on a monthly basis,” he advises.

Campbell has a slightly different answer based on auto loans at MCU.

He says, “How much a member can borrow is determined on an individual, case-by-case basis. As a matter of policy, MCU will lend up to 140% of the National Automobile Dealers Associations’ (NADA) retail on new and last one model year vehicles (last year’s model) for borrowers with excellent credit.”

He adds there is no dollar amount cap, provided that the borrower has the credit, capacity, and collateral to make for a good loan risk to the credit union.

However, borrowers with less-than-stellar credit will face a few restrictions.

Credit-impaired borrowers can expect a fair, but higher APR due to the implied risk. They won’t be able to have negative trade equity financed and may need to come up with a down payment if the car’s price is above NADA retail”

Credit-impaired borrowers can expect a fair, but higher APR due to the implied risk. They won’t be able to have negative trade equity financed and may need to come up with a down payment if the car’s price is above NADA retail,” Campbell says.

How can you pursue an auto loan from a credit union?

Your first step should be to review your credit history and score. Next, figure out what you can afford and then identify what type of car you’re looking for.

Having this information before you work with a lender will help you better understand what you can realistically borrow.

Check out SuperMoney’s reviews on the leading credit reporting agencies, so you can get the best possible deal on credit reporting.

What should your credit look like?

Pendergast says, “There’s no magic number when it comes to credit scores, and credit unions will work closely with their members to find the best financing option available.”

Campbell also says there is no particular credit range that would guarantee approval for an auto loan.

He adds, “We only ask our members to do everything they can to have as good a credit score as possible, and pay off any high interest debts or take care of any negative marks against their credit prior to applying.”

At Elements Financial Credit Union, Executive Vice President of Lending and Sales, Ron Senci, also emphasizes that there is not a set score required to get approved for an auto loan.

All applications that aren’t auto approved are reviewed manually, explains Senci.

He adds, “This allows us to understand the applicant’s situation and contact them for further clarity around any issues. It’s a more individualized approach that you don’t see at larger banks, which ultimately allows us to approve more loans for our members.”

Helpful tools for getting your loan

Fast pre-approval

Pendergast explains that Navy Federal members have the option to use their mobile device to get pre-approved for financing. He says, “Since many of our members are younger and in the military, this gives them the option to get pre-approved while they’re on-the-go.”

Campbell also suggests trying to get pre-approved if you’re able to, explaining that this will help a borrower understand what kind of car they can afford before they go shopping.

When applying for an auto loan pre-approval, ask several lenders to make sure you get the best rates and terms available. SuperMoney’s auto loan offer engine allows you to obtain multiple prequalified loan offers without hurting your credit.

Special programs

Navy Federal has an Auto Buying Program that offers discounts not available to the general public.

MCU offers the MCU Car Buying Service, powered by TrueCar, which allows the member to research the vehicle, get a price for the car, and submit the application for a pre-approval right on the spot.

“The pre-approval allows them to go in with a firm offer as a cash buyer for the vehicle, avoiding the hassle with the dealership’s finance manager. This direct approach is of great benefit to the member,” he says.

SuperMoney’s auto loan offer engine allows you to obtain multiple prequalified loan offers without hurting your credit.”

Get started!

With SuperMoney’s auto loan engine, you can get pre-approved, personalized loan offers from leading lenders. You can then head over to our auto loans reviews page to compare each lender’s rates, terms, and consumer reviews.

And don’t forget to check out our credit unions reviews page either. The more you know, the easier it will be to make the best decision.

After all, knowledge is power, right? Happy car shopping!

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