Both banks and credit unions offer almost similar financial products and services for customers. The difference is that credit unions are non for profits while banks are for profits. Credit union is established with a specific mission for the local community, for example, the credit union may be set up to offer affordable loans for the employees of a company or members of an association. Since they are set up with the aim of serving the local community, the terms of the loans they offer will be more favorable.
Credit unions will often charge lesser interest rates and fees compared to banks because they put more focus on service rather than making money. Banks, on the other hand, like to charge higher interest fee, because their goal is to make profits from the loans. If you are a long time customer of a credit union, they may offer you an attractive interest rate. If the bank is to offer high quality customer service, they will have to reduce the amount of interest rates and other fees they are charging.
Banks have tougher requirements for getting approved for the loans. They will put a lot of requirements for the loan applicants to meet such as salary, credit score and other factors. They are more strict when evaluating your application even if you feel that you could qualified for the loans. Because credit unions are generally smaller, they will usually approve your loan application easily. They won’t let any unexpected issue to stop your loan application from getting approved especially if you are a loyal member in good standing.
Credit unions usually only serve small communities so it is harder to locate their branch if you live in the city. It is easier to find a bank’s branch because they will have a few branches within the city. Credit unions are slow in following up on the latest consumer technology compared to bank so they will usually not offer convenient services such as online and mobile banking. Both credit unions and banks are federally insured and licensed to offer small personal loans. The FDIC is the organization responsible for insuring the banks while the NCUA is the organization that insure the credit unions.
As you can see, both banks and credit unions offer their own advantages. To decide whether to sign up the personal loan with a bank or credit union, you should ask yourself what is most important to you for example low rates, advance technology, and good customer support. You can get recommendations of reputable bank or credit union from friends or at the personal loans review sites. You can pick a few banks or credit unions that meet your criteria and than compare them.