Though the majority of people who seek loans to purchase things like homes or cars turn to traditional banks, credit union usage has been on the rise. In fact, between 2019 and 2020, credit union membership rose in the U.S. by almost 3 percent¹.
There are many reasons for consumers to choose credit unions over banks, but we wanted to find out if one commonly cited benefit holds true — do credit unions really offer lower rates on mortgages, used-auto loans, and personal loans? (More on the other differences later.)
To do this, we analyzed the data RateBunni gathers to compare rates for both types of lenders across the country.
Key Findings:
- On average, credit unions have lower rates used-car loans and personal loans, but their average rate for mortgages is slightly higher than the average rate offered by banks in the U.S.
- In our analysis of 192 banks and 287 credit unions across 43 states, credit unions had lower rates 93% of the time.
- Only three states of the 43 analyzed have a higher average rate from a credit union than from a bank for auto loans (Ohio, Texas, and West Virginia).
Comparison of Banks and Credit Unions
In general, our analysis determined that credit unions have lower rates on average than banks, though there were some interesting exceptions. While credit unions had lower rates on average for used-auto loans and personal loans, taking into account data from all states, banks have a slightly lower average rate when it comes to fixed-rate 15- and 30-year mortgage loans.
Who Offers The Lowest Rates?
We also examined which institutions, both banks and credit unions, offer the lowest rate for each product type. That analysis found that for mortgages and personal loans, it was a bank that offered the lowest rate.
Here’s a look at the banks and credit unions with the lowest rates for each loan type:
Used Auto Loans
Banks
1.00% | |
1.00% | |
2.09% | |
2.17% | |
Auto Club Trust, FSB | 2.19% |
2.49% | |
2.75% | |
2.75% | |
2.75% | |
2.80% |
Credit Unions
0.99% | |
1.00% | |
1.24% | |
1.49% | |
1.49% | |
1.49% | |
1.49% | |
1.59% |
Personal Loans
Banks
| The Ephrata National Bank | 1.00% |
| First Bank and Trust | 2.00% |
| Mechanics Cooperative Bank | 3.05% |
| Elmira Savings Bank | 3.39% |
| Fulton Bank, National Association | 3.50% |
| Orrstown Bank | 3.59% |
| Independent Bank | 4.29% |
| Regions Bank | 4.74% |
Credit Unions
| 1st United Services | 1.99% |
| Sun East | 1.99% |
| Credit Union One | 2.00% |
| Firefly | 2.10% |
| HFC | 2.24% |
| Jovia Financial | 2.25% |
| Citizens Equity First | 2.90% |
| AmeriCU | 3.00% |
Fixed-rate 15- and 30year Home Loans
Credit Unions
| Provident | 2.19% |
| Advancial | 2.71% |
| LGE Community | 2.73% |
| Advantis | 2.76% |
| Orange County’s | 2.78% |
| American Eagle Financial | 2.82% |
| ESL | 2.86% |
| Apple | 2.86% |
| Mountain America | 2.88% |
| Security Service | 2.88% |
Differences by State
In most cases, the average credit union rate in each state for mortgages, personal loans, and car loans is lower than the average rate offered by banks. But this does not hold true in every state or for every type of loan.
Take, for example, loans to purchase used autos. Our data covered both banks and credit unions in 43 states, and in 40 of those, the average credit union rate for used auto loans was lower than the average rate offered by banks for such borrowing.
But in Ohio, Texas, and West Virginia banks have the edge. And in some cases, the differences can add up to serious money. In Maine, for example, the difference between car loan rates at banks and credit unions is nearly 4%.
Are Credit Unions Better Than Banks?
As we’ve seen, depending on your individual situation, a credit union may offer a lower rate on certain types of loans. And there are other benefits that make credit unions attractive for borrowers.
For example, credit unions are nonprofit entities that offer lower rates by virtue of the fact that they return profits back into the institution. Banks, on the other hand, are privately owned or publicly traded, and profits are shifted to owners (or shareholders).
While these facts alone can make a credit union seem like the clear winner, the reality is, of course, more complex. After all, if credit unions were always the better option, then banks would have no reason to exist.
For one, credit unions are open only to people who are members of the credit union, and many of them have specific requirements on who is eligible, which means a credit union rate may not even be an option. Another advantage of traditional banks is the extent of product offerings, as banks tend to offer more types of loans than credit unions.
But when it comes down to it, the best option for you depends on your credit history, your loan needs, your income, and a variety of other factors. That’s why whether you’re preparing to buy a house or need a personal loan to pay off debt, it definitely pays to shop around. Just make sure you’re keeping credit unions on your list, as our analysis shows they tend to offer lower rates. Find credit unions and banks today on RateBunni.
Conclusion
Smart consumers know it pays to shop around for loans, but many borrowers may be overlooking resources for lower rates in their states and for the types of loans they want. Doing your homework when it comes time to buy a new car or a house can save you hundreds or even thousands of dollars in the long run.
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Methodology
Our analysis is based on publicly-available data we’ve collected on hundreds of lenders across the country. We also factored in regulatory sources such as FDIC and NCUA to analyze lender geography, product offerings, and lender size. Additionally, our analysis was limited to the segment of banks with assets between $600 million and $180 billion, which includes 479 financial institutions, comprising 192 banks and 287 credit unions, though not every institution offers every loan type. Our analysis included 311 lenders offering personal loans, 155 offering 15- or 30-year fixed-rate mortgages, and 350 offering loans for used vehicles. Data in this analysis is from November 2021.
We used the lowest average rates these banks and credit unions advertise, which may not be the rates they offer most consumers. Not all lenders offer loans to all credit tiers, and as a result their state’s average of lowest advertised rate might be impacted. We recommend shopping around to find the best rates based on your credit score and financial history. This article is for informational purposes only and should not be used for making financial decisions. Loan rates change regularly, and because advertised rates vary from rates that you may be offered, consumers should not assume that they will be able to get a loan with the rates listed here.