It’s crucial to know where you can finance your education, as while entering graduate school, the cost of college will go beyond your undergraduate degree.
Federal student loans offer the best interest rates and terms, for most of the borrowers. Private student loans can be the next best option if you fall short of your attendance in federal student loans.
At instances, if you find yourself in this situation, you can consider Credit Union Student loans besides the loan offered by big banks and online lenders. Not only Credit Union Student loans provide a better overall experience but a competitive term also.
Table of contents
- What are credit unions?
- Benefits of credit union student loans
- Drawbacks of credit union student loans
- Are credit union student loans right for you?
What are Credit unions?
Credit unions are not-for-profit organizations that serve their members. A member can avail of the vast array of financial services provided, just like the working of a bank, members can make deposits or even take out loans. The loans taken out form the credit unions for educational purposes and expenses are referred to as credit union student loans.
They are similar to private lenders wherein they aren't taken from the government and don't have federal benefits associated with them. Credit unions function independently and don't have financial motives in mind.
Difference Between Credit Unions and Banks
Credit Unions and Banks provide the same services but have different motives. As banks are for-profit businesses, their No 1 goal is to maximize the profits.
While on the other hand, Credit Unions are not-for-profit businesses that return the profit to their members in higher saving yields, lower loan interest rates, and better services.
Credit Unions serve a specific community, either regional or organizational. As they are deeply rooted in the city, they understand the needs of their members better. They may not be the best option always, but it is worth considering them.
However, you should always remember that you have to become a member of credit unions before you apply for any student loan or other financial products. Sometimes you may not get qualified based on individual credit union’s eligibility requirements.
Benefits of Credit Union Student Loan
Many of the features are offered by private lenders and credit unions for the loans provided are similar. There are some credit unions that allow you to make low payments (or no payments) while in school. By setting automatic payments you can also reduce your interest rate.Following are some Benefits of Credit Union Student Loans:
1) Lower your interest rates
Credit Unions can offer competitive interest rates to borrowers, even if it is smaller than national banks. Credit Unions can offer loans at cheaper rates, as it is a nonprofit organization.
Alliant credit union offers student loans with interest rates as low as 3.96% whereas Discover student loan rate is 4.62%, from March 30, 2018.
Not every credit union always needs to have a lower interest rate than big banks or online lenders. You will need to compare all the different types of private loans. But you can get a better deal from credit unions.
2) Better Customer Service
Customer is treated fairly, as Credit Unions are member-oriented institutions. The board of directors to run the organization is voluntarily elected by the members. That means you can know how things are managed.
Credit unions know they have to survive, so they treat their customer’s right to survive, as they aren’t big enough.
But we can’t say that every union is perfect. You can check the reviews on the Financial Protection Bureau’s complaint database and on the better Business Bureau, Before joining anyone.
3) Often more Relaxed Lending Standards
When applying for private students loan your credit and income matters, unlike in federal student loans. Usually, a co-signer is needed to get the approval of your private loan if you don’t have a good credit score or a steady income as proof.
Like other loan lenders, your credit and income will also be considered by the credit union when you apply for a loan. The lending standards may not be as strict when you or your co-signer are members of the credit unions or have an established relationship.
When big banks deny you, there is a chance you might get approved of your loans. Or you can also get better rates when the credit unions consider your existing relationship into accounts.
4) Better Banking
Lower fees, better services, and underlying satisfaction can be felt when you opt for credit unions.
Since the Digital Federal establishment, our families are using the same service as they have treated us well, consistently matched the rates and services of national banks and expanded their business in our area. Naturally, with all these benefits anyone can be inclined towards there services. In the past five years, the Digital Federal’s student lending portfolio grew from $4 million to $100 million.
As the mutual attraction between the students and their credit union is growing. The two options for two student loan services should be considered: Student Choice and CU Student Loans.
5) All other options Exhausted
Sometimes, Private Student loans may become necessary, when it comes to funding for education. One should consider applying for private loans, only when all the other resources like loans, grants and scholarships.
Drawbacks of Credit Union Student Loan
The following is the disadvantages a borrower with credit union student loans will face
1) You must be a member of the credit union you wish to take a loan from
You must be a member of credit unions to use their services. To become a member you may be required to make a small donation to a charitable organization by many credit unions. Others might only accept members who live in the given area, work for a specific employer, or are affiliated with a particular school, labor union or a particular group.
You may be required not just to become a member but to have other products with them, like checking accounts by some credit unions. Meeting these requirements may be inconvenient until you want to start a full-time banking relationship with credit unions.
To find out the membership requirements you can use MyCreditUnion.gov(link) to research credit union in your area.
2) Finding a credit union student loan can be challenging
Nowadays everyone has heard about big banks that operate in every state. But finding the best deal on the loan can be a big challenge, as credit loans are spread across the country.
The kind of loans you are looking for is not always offered by credit unions. Some of the credit unions don’t offer student loans at all. Or else they limit the loan option to undergraduates or refinancing loans.
Services such as Lendkey allows you to shop for loans among much different credit union and community banks. The process is simplified and easy to find a credit union to borrow from.
3) Doesn’t provide the same perks as other private lenders
Credit Unions may not match the revenue and the customer base to support special programs like that of big private lenders.
For example, private lender CommonBond offers the CommonBridge program, If you are unexpectedly unemployed then it can help you earn extra income. You can earn professional experience and a little extra income if it matches members with the consulting opportunities at CommonBond.
Are Credit Union Student Loans right for you?
There cannot be any right answer to this question. Whether you qualify or not is the biggest consideration in the credit union. Even you do, you have to compare the credit union’s interest rates, fees, and other features to the top private student loan companies.
Alternatives to a credit union student loans
If you can’t get a credit union student loan here are some alternatives to explore -
CU Student loans can be considered when you currently don’t belong to the credit union but want to use one of your student loans. CU Student loans concentrate the students lending across over 100 credit unions whereas Student Choice is a service used on behalf of your particular credit union.
Highly Rewarded are given to Good Credit and Academic Standings-
For determining rates, CU students use their own formula. You don’t need a co-signer if you a student with a good credit history. You may qualify for lowest rates available through CU student loans, who issue rates as low as 3.47 % by their own formula if you have a good GPA.
After all your efforts, you may have a better chance of picking the best lender who offers you the best combination of the features you needed.