Disadvantages of Credit Unions That You Didn’t Know

ElitePersonalFinance
Last Update: November 21, 2020 Banking Loans

Credit unions have numerous advantages against banks and online lenders. Be sure of that. Whether you are looking for a loan or other service types like investment products, most credit unions beat banks and online lenders. Their products are better, and their fees are less.

Let’s compare loans from credit unions vs. loans from banks and online lenders.

  • Credit Unions vs. Banks

Loans from credit unions are on reliable rates, and in most cases, they beat bank loans. But even if a loan from a credit union is more expensive than a bank loan, the difference is not significant. Credit unions’ loans are capped at 18%. Personal loans are capped at 35.99%. Banks have high credit and income requirements, and in most cases, they require a co-signer or a secured loan. Credit unions have low credit requirements. Instead, they try to find your actual ability to pay the loan on time, evaluating criteria like your income and debt to income ratio. There is no even a reason to compare payday loans vs. credit unions. Many people don’t know that, but credit unions offer a payday loan alternative, which is capped at 28%. Payday loans are at 400% APR.

  • Credit Unions vs. Online Lenders

The online lender marketplace improves every day. These days, we can say that it is significantly better than before, but credit unions’ loans are still less expensive. Although credit unions don’t have significant credit requirements, they don’t like to approve people with very bad credit. Even their payday loan alternative has credit requirements, and for people with meager credit, chances are low. Here payday loans beat credit unions because they offer loans for people with a very low credit score.

But credit unions come with their disadvantages. And here we will discuss some of them.

Credit Unions Require You to Become Their Member

Credit unions are something like banks. When they give you money, they require you to become their regular member. This would mean that they’d require you to use all of their services from them.

Solution:

When looking for credit unions, you should always research all credit unions available in your area and pick one that works best for you. Check their services carefully and decide which will be best for you. Now, there are national and local credit unions. You should carefully research all of them before pick one.

Credit Unions have Specific Requirements

You’ve found the best and cheapest loans, credit cards at your best credit unions, and you are ready to register. That’s great! But you don’t meet other criteria. Most credit unions have some additional criteria, like workplace and so on.

Solution:

Review all credit union requirements and find whether you qualify. If you are not sure, call them and ask.

Credit Unions Perform Hard Credit Inquiry

Are you looking for a loan? What is the best way to find the best loan for you? Shop around! No other way. You can go and apply with many loan companies without worrying about your credit score. Because all legit online lenders perform a soft inquiry, which means your credit score doesn’t lower after applying with multiple lenders. Credit unions perform hard inquiries, so when you apply for a loan from a credit union, you shouldn’t apply with many at the same time.

Solution:

Research and ask before apply! You should carefully research all credit unions and make a list of these you like and plan to register with. Then call them, explain to them your situation, what loans you are looking for, and ask them will it be possible to get what you want. Then delete all credit unions from your list that wouldn’t be of help. From the rest, pick your best and apply only with them.

Pro Tip for bad credit loans:

Credit unions offer a payday loan alternative. Many people still don’t know about that because many credit unions don’t list them on their main loan pages.

Why?

Because they don’t have an interest in these types of products.

Payday loan alternatives are small loans of less than $1,000, capped at 28%.

How to find whether your credit union offers a payday loan alternative?

Call them and ask. This is the best way.

Too Many Choices

There are 5,757 credit unions in the United States! There are over 100 banks in the US.

And how many of these banks are big? The biggest banks in the US are not much more than 10, let’s say …

So, if you are looking for a bank, then your choice would be much easier than researching credit unions.

Actually, not all of these credit unions are for you. Most of them don’t accept people from your area. Others don’t meet your requirements. And so on. But still, the number of credit unions that work for you is significantly higher than the number of banks. So you will have a lot of work to pick the best for you.

Fewer Options

Big banks always beat credit unions in terms of products. This could be considered an advantage but also a disadvantage. Go to some big banks and find how many credit cards, loans, and other products they offer. If you compare with a regular credit union, you’ll find that they offer fewer items.

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