Requirements for Credit Union Auto Loan Approval
If you are planning to buy a new or used car and you do not have enough cash, you can always opt to apply for credit union auto loans. They are one of the best choices when you are looking for the cheapest auto loans in the market. Through these, you can save a lot of money when it comes to incidental costs and interests.
Compared to banks and financing companies, credit union auto loans offer lower interest rates and members pay less incidental fees for their loan application and documentation. Usually, this type of loan works best if you choose car dealers with an associated credit union.
If you are buying a car and are interested in acquiring one of these credit union auto loans, here is a guide on the requirements needed and ways to get the best rates.
You need to be aware that credit unions only offer auto loans to their members. These institutions have different requirements and criteria for you to be eligible for membership. Some of the most common requirements for a potential member include working for a particular company, being a resident of a particular community or village or being a member of a specific organization.
Everyone can be a member of a credit union. Even if their requirements are a little challenging, if you are patient and do your research you will find the perfect credit union that suits you.
Credit and Employment History
It should be noted that credit unions who approve credit union auto loans have limited financial resources compared to banks and other financing institutions because they solely acquire their funds through their members. As a result, they must appropriate their funds wisely.
In line with this, members who apply for credit union auto loans must pass their standards in terms of their FICO score. The credit rating of an individual determines the likeliness of him/her paying his loan and other obligations. Credit unions don’t want to lose their earning potential with their funds to some individual with a bad credit history.
Most credit unions who give out auto loans require loan applicants to have at least a stable career in the company they are working for. By definition, it means having worked for a particular company for at least 12 months.
Gross Monthly Income
Credit unions also investigate the earning capacity of a loan applicant. They look into your gross monthly income and deduct all the expenses you have. After this, they will determine whether your net income will still be sufficient to pay the monthly amortization of the loan amount.
Credit Unions that offer credit union auto loans are no different than banks and financial institutions when it comes to the requirements and documents needed for your application to be processed. The main advantage of getting credit union auto loans is that you could save a large margin in incidental fees to process and document your application.
Now that you know the requirements, let’s discuss the ways to get the best rates.
Check Your Credit Score and Know How Much Interest You'll Be Paying
You shouldn't sign on loan without being aware of how much interest you'll be charged. Find out what the annual percentage rate will be. Interest rates, along with all the other fees that come with a loan approval, are called "finance charges." Knowing how much you have to pay makes it easier to stick to a budget.
Your credit rating is a big factor in loan approval and it can determine not only how much you get but at what interest rate you'll be charged. By law, you are allowed one free yearly copy of your credit report from each of the three credit reporting bureaus (TransUnion, Experian and Equifax). To obtain these, simply visit AnnualCreditReport.com. Once you've received your reports, check them for inaccuracies, and correct any you find.
Select the Length of Your Loan
The longer the loan term you agree to, the more you'll end up paying. Where loans used to have an average duration of three years, there are now loans with six and eight-year terms. If at all possible, stay away from any loan with a term longer than 72 months. It just doesn't make good financial sense to keep paying on a loan for a car that's old and worn out. A shorter-term loan will save you a lot of interest and car loan lenders are more likely to agree to a short-duration loan.
Your Down Payment
Your down payment is the amount that you pay upfront toward the total purchase price of your vehicle. It's separate from the loan amount. The more you put down on a vehicle, the less you'll have to finance. You've probably heard a lot about "no money down" car deals, but beware—these are set up to benefit the dealer. The more you're able to put down on a car, the more likely it is that the seller and auto loan companies will be able to approve your loan.
Read the Fine Print
You should be on the lookout for hidden fees, late fees and other charges such as prepayment penalties. These can sometimes fall into the "miscellaneous" category, and as such, aren't usually part of the discussion between you and your credit union. Taking a little time to read the fine print may be a hassle but it will save you money in the end.