The IFCU Blog

Whether you’re purchasing your first car, upgrading your family vehicle, or refinancing an existing loan, securing the best auto loan deal is crucial. Many people automatically turn to banks or dealerships, unaware that credit unions can offer significantly better options. Credit unions are well-known for offering competitive interest rates, personalized service, and member-focused benefits that often surpass those of traditional banks. If you're looking to finance a new or used car, choosing a credit union may help secure better loan terms, and ultimately you money over time. This article will guide you through a few key factors you should consider when purchasing your next vehicle.

Why Choose a Credit Union for Your Auto Loan?

Credit unions are cooperative institutions owned and governed by their members. Rather than generating profits for shareholders, they reinvest earnings into member services. According to data from National Credit Union Administration (NCUA), credit unions consistently offer lower average auto loan rates compared to banks. In December 2024, the average auto loan rate at credit unions was 1-2% points lower than those of banks. 

Additionally, credit unions often provide a more flexible approval process. While big banks may rigidly follow credit score cutoffs, credit unions consider your broader financial picture—including income stability, relationship history, and community ties.

Credit unions return profits to members in the form of:

• Lower interest rates

• Fewer fees

• Flexible loan terms

• Personalized customer service

• Stronger community involvement

These advantages make credit unions a strong contender for anyone seeking an auto loan.

Key Factors to Consider When Choosing a Credit Union

1. Interest Rates and Loan Terms

The interest rate you receive on an auto loan depends on several key factors, including your income, credit history, and especially your credit score. Among these, your credit score carries significant weight, as lenders use it to assess the level of risk involved in lending to you. A higher score generally indicates a stronger repayment history, which can lead to more favorable loan terms and lower interest rates. 

For your loan term, choose a term that fits your financial situation without extending unnecessarily. A 36-month loan might offer the lowest interest rate, but your monthly payments could be significantly higher. On the other hand, a 72- or 84-month loan will reduce your monthly obligation but increase the overall interest paid. To find out what payment will work best for you, use an auto loan calculator to estimate your monthly payments and total loan cost.

2. Membership Eligibility

Credit unions typically have membership requirements. You may qualify if you:

• Live or work in a specific geographic area

• Work for a certain company or industry

• Are affiliated with a particular organization

At Industrial Federal Credit Union, joining is easy. We are a diverse group of 30,000+ members and we want you to be one of them! Becoming a member is easy. 

How to Join a Credit Union and Apply for an Auto Loan

Step 1: Check Your Credit Score

Your credit score and history will influence your loan approval and interest rate. Reviewing your credit report ahead of time can help you address any issues and improve your chances of getting favorable terms.

Step 2: Gather Required Documents

Prepare the following:

• Proof of income (pay stubs or tax returns)

• Government-issued ID

• Proof of residence

• Details about the vehicle (if already selected)
  
  

Step 3: Complete Your Application

At Industrial Federal Credit Union, you can apply for an auto loan before becoming a member. Once approved, joining is fast and easy—just complete a few simple forms to finalize your membership.

After you join, loan applications are often reviewed within one or two business days. If additional documents are needed, you’ll be contacted by phone or email.

For faster approval, make sure your income verification documents are recent, and your contact information is accurate. Consider calling the credit union directly to clarify any questions—they often provide more personalized service than banks.

Step 4: Get Pre-Approved

If you’re planning to buy a vehicle from a dealership, getting pre-approved for a loan provides an advantage when negotiating with the dealership. It demonstrates that you are serious about purchasing a vehicle and have already secured auto financing. It can also help you stick to your budget, as you will know exactly how much you can afford.

What to Look for in Auto Loan Offers

When evaluating offers, look at:

• APR and fees: Compare full loan costs, not just interest rates.
  
  

• Loan terms: Consider how monthly payments and total interest align with your financial goals.
  
  

• Extra perks: Some credit unions offer benefits like discounts on insurance, or financial education resources.

There are other ways to save on auto expenses with a credit union membership. For example, Industrial Federal Credit Union has joined with a dedicated team of insurance professionals to bring members the TruStage® Auto & Home Insurance Program.

Working with carefully selected insurance companies, these programs can provide discounted rates exclusively for IFCU members, online services, and 24/7 claims service.

Don’t forget to consider refinancing options. If you already have a car loan at a high interest rate, Industrial Federal Credit Union may be able to refinance it at a much lower rate, reducing your monthly payments or shortening the term. Read our recent post, to learn more about refinancing an auto loan.

Final Thoughts

Choosing a credit union for your auto loan can make a significant difference in what you pay over time. By focusing on interest rates, loan terms, and membership eligibility—and by getting pre-approved—you’ll be in a stronger position to finance your vehicle affordably. Credit unions offer a member-first approach that makes them a smart alternative to traditional banks for auto loans.