(Newswire.net — June 7, 2021) — Various financial institutions bring different products and services to consumers. Most people use banks or well-known lenders for their savings or loan needs.
However, if you want to build your credit, or have a more tight-knit financial community, you might want to consider a credit union.
What Is a Credit Union?
A credit union is just like a traditional bank, offering services such as savings, loaning, checkable deposits, and even investment options.
Customers can get common financial services like saving money or applying for a loan. However, instead of being owned by stockholders, credit unions are owned by their members.
As a result, credit unions have fewer branches all over the country. They also have a better option for opening a savings account and more flexible terms in loaning.
Credit union members deposit money to fund the operations of the co-op. To earn profits, some parts of the money are also put on profitable investments.
Banks vs. Credit Unions
How Do Credit Unions Compete with Banks?
Banks can beat credit unions for convenience and options, and there’s no doubt about it. However, credit unions tend to be favored by people who are struggling to avail services from traditional banks.
Overall, credit unions can still compete with banks in certain fields of financial services, especially in customer support and credit building.
Better Customer Service
Most credit union personnel are not really “employers” per se, but volunteers that keep the members’ interests in mind. And yes, given the time, the volunteers will give you sound advice when you’re having trouble with your finances.
Great Interest Rates
Another thing that makes credit unions a popular option for people with troubled financial conditions is the more favorable interest rates. This applies to both loaning and opening a savings account. Read https://moneyqanda.com/benefits-of-a-credit-union/.
You will likely receive a higher interest rate on your savings account. And this means accruing more interest income in the long run.
More Flexible Loaning Options
Traditional banks are strict in their requirements for approving a loan. If you have a low or no credit score, you likely will not get a chance for loan approval.
But for credit unions, the credit score is just one factor. You can have a better chance of getting loans from credit unions because they will likely consider that financial misfortunes do happen.
Lower Fees
Volunteer members who run the union would also need to get paid for their services. The rent and electricity bills would also not pay themselves. Hence, most unions would also charge loan origination fees and other service fees to keep on top of administrative matters. However, the fees are lower than traditional banks.
Help in Credit-Building
Credit unions often offer credit-building loans to customers who were hit with bad financial luck in the past. Credit-building loans also serve as a savings initiative, since the loan amount that you get will be held in a bank account.
The debtor will not be able to access the loan money until the loan is fully paid. After the term, the debtor will both have a better credit score and savings account as well, which is a win-win situation.
Are Credit Unions for You?
Credit unions are not for all customers, especially those who want convenience over other benefits. There are certain instances when these co-ops are not the best option for someone’s finances. People who travel a lot, or manage multiple accounts might find traditional banks a better fit for their lifestyle.
However, if you want to get more interest out of your savings safely, a credit union is a better option. Members would also likely receive more help and consideration on their loans than they would via traditional banking.
In addition, the requirements are more flexible in both loaning and saving. Hence, credit unions are a better option for people who have low credit scores.