Whenever lending is being discussed, the bank is still the top authority placed in the spotlight. A bank already has a name and brand known by many people. All of the bank’s loans are sanctioned and well-regulated, creating a somewhat stringent process. One of the reasons why banks are strict is risk management. If they just give out loans freely, they will be at greater financial risk. In turn, many borrowers are still reluctant to approach banks whenever they need loans. One great alternative to banks is a credit union.
Credit unions are similar to banks in many ways, but they are smaller. They are managed by their own members, making adjustments through a fair voting system. It’s a system run by the people. If you want to take out a loan but you can’t bear the strictness of banks, you should try approaching a credit union. There are many advantages to begin with.
Quick & Easy Transaction
Unlike banks, credit unions allow easy transaction processes. In most cases, you only need to fill up a form and wait for a representative to interview you. The interview is simple – you just need to answer the basic questions of the interviewer, such as the purpose of the loan and your income source. Most credit unions also require few government documents. If a credit union allows online applications, the process can even be much faster.
Banks are known for large interest and hidden fees. These fees cover up their risk, and they tend to make huge profits according to the payment terms. Credit unions have smaller rates and fees. A typical loan will clock at around 10-15% interest per month. Other unions can have slightly bigger or smaller rates. Even though the rates are manageable, you can only choose from few loan programs. Sometimes, credit unions can offer only one type of loan. This pales in comparison to the multiple loan types that banks can offer.
Very Simple Credit Investigation
Local credit unions have credit checks, but they’re not as strict as banks. For the credit check, the credit union will just review your document and income proofs. Afterwards, your loan can be released. If you live in a rural area, the credit union can ask your friends regarding your status and life situation. Any detail they find can be used to assess if you’re worth the risk. Since rural areas tend to be smaller, credit unions can get the information they need in lesser time.
Despite their advantages, credit unions still have some setbacks. Since they are less known, credit unions can only offer basic loans. There are no fancy variants or other perks. If you’re okay with this, find a credit union and submit your application!