One of the most common questions people have when looking for a personal loan is where they should get that loan. There are some obvious bad choices that should be avoided, such as Vito from down the street and, if at all possible, the payday lender across town.
From there, though, the waters get a little bit muddier. It’s not always clear who has the best deal on a personal loan. That’s why, if you’re going to get the best rate and the best overall terms, you need to do a bit of shopping around. Inevitably, you’re going to need to make a decision about whether you want to get that personal loan from a bank or from a credit union.
What are credit unions?
It’s important, first of all, to understand the difference between a bank and a credit union. A credit union is owned by the members. When you join, you’re a part owner in the credit union. You have a voice in how the institution is run. You get to elect the board of directors that actually govern the credit union. Your choices have a direct impact on how the credit union is run. This all stands in contrast to a bank, where only shareholders have any say in the company.
A credit union is also a non-profit organization. This means that the earnings the bank has comes back to their members by way of high-yield savings products and low rates on loans.
Rate really does matter
And so, it really does all come back down to rates. If you can get a better rate at a bank, you should highly consider getting your personal loan through the bank. If you can get a better rate through the credit union, then you should go that route.
On average, you’re going to get a better rate with the credit union. Keep in mind, however, that banks will regularly run specials that can compete directly with the credit union rates, so it’s not a hard and fast rule.
Overall banking services
In fact, some experts suggest that you ditch your bank for a credit union altogether, not just for loan services. There are compelling reasons to do so, too. By being a member in a non-profit institution, you’re more likely to see rates and terms that are in your best interest, rather than the best interests of shareholders.
Photo via Michel Filion