Saving money on your car loan is a major lifesaver for a lot of people. With the threat of the economy, job security, and rising prices, saving on something like an auto loan could be very helpful. You have heard a lot of advertisements and business establishments saying that they could give you the lowest rates and such. The truth is, the lowest auto loans that you can obtain are through credit unions.
Don’t be too excited though, because these organizations are only open to members who share a common goal. However, it might be a good idea to consider joining one because you could save a lot. At first, glance, you will notice that banks and credit unions function and operate pretty much the same. Nonetheless, a deeper look at their history and their purpose will reveal to you that there are major differences.
Perhaps the most noticeable difference between a bank and a credit union is that a creditunion is non-profit while a bank is for profit. It is important to take note of this fact because this is what sets credit unions apart from major banks when it comes to lending. In order for banks to thrive and to be able to proliferate, they need to make a lot of money. The way they make money is through the interest that they charge on their loans.
The profit that they make is used to expand their business and make even more loans to the public. A credit union, on the other hand, does not charge excessive interest rates because it does not intend to make money. Therefore, since its interest rates are considerably lower than traditional lending institutions, the rates that they charge people are also significantly lower. In addition to that, the profit that they make is either reinvested in the cooperative or used as a dividend that is paid out to all the members.
Financial institutions, on the other hand, are owned either by stockholders or investors. The governance is controlled by a very small group of people who are appointed by the owners of the company. Not just that, since banks are operating on a for-profit basis, they must be taxed by the government. This just adds to their bottom line, which results in higher interest rates.
Having said all that, credit unions are able to save you money on your car loan because they are all about offering attractive rates to their members. Because they are a not for profit business, they are not taxed by the government and as a result of that, they are able to charge lower interest rates. Over the course of a car loan these lower rates can save you a bundle of money. It might be in your best interests to become a member of the nearest credit union you can find.