There’s something you should understand about credit unions. Despite their friendly, “we’re all in this together” attitudes, they’re still, at their cores, a type of bank. That means that while they may have more friendly offers and you may have more say in how things work if you’re a member, they still have to run a business that meets local, state and federal rules and regulations and, ultimately, remains profitable. That means that if your credit score makes you a bad risk, approaching a credit union doesn’t mean that you’ll be any more likely to get a loan.
If, on the other hand, you do qualify for a loan, and you have access to a credit union, it makes sense to see what kinds of terms they can offer you. Membership in a credit union means a greater level of customer service, but it may not necessarily translate into better loan terms. Credit unions should be considered according to the same criteria you’d use in evaluating any other lender.
And like any other lender, a credit union will have limits on the age of car it will finance, how much it will finance on a particular car, the length of the finance term, and who it will or will not lend to. If you haven’t yet decided on a car, it’s a good idea to meet with a loan officer at the credit union and talk about getting pre-approved. After all, there’s no sense falling in love with a car that you’ll never be able to afford.
To start the pre-approval process, decide how much money you can put down as a down payment and how much you want to finance. It’s a good idea to talk to more than one lender when you’re doing this. Different lenders have different underwriting criteria, and when you’re buying a car, an extra $2,000 can sometimes make a big difference. So can an extra percentage point of interest in the long run.
Speaking of the long run, that’s a figure that you very much want to keep in mind. Look at the total amount of money you’ll be paying when all is said and done, and look how changes will influence that total figure. For example, cutting a year off the loan term might only increase your payment by a small amount, but it could make a real difference in how much you have to pay back over the course of the entire loan. Generally speaking, it makes sense to go with the shortest term that’s practical and the highest monthly payment that’s practical if you want to save money. And after all, who doesn’t?
If you think you may not keep your car for the entire term of the loan, be sure to find out if someone else can assume your loan and if you get a pre-payment penalty for paying the loan off early. Your credit union should be able to give you this information with no problems.
