Credit union rates can have a significant impact on the financial health of consumers. With rates often competing with those from traditional banks, it's important to understand what factors can cause them to fluctuate.
Read on to learn more about the factors that can influence credit union rates.
Level of Competition
One factor that influences credit union rates is the level of competition within the industry itself. When there are more lenders offering loan products and services, it can lead to competition that drives down rates.
In some cases, credit unions may offer better rates than banks or other lenders due to the same competitive landscape.
This is why credit union members should keep an eye on their local market and the competing products offered by other lenders. This will allow them to ensure they get the best rates possible for their loan products, especially if they want to cut down on interest payments or save money on their loan.
The Loan Amount
The size of the loan is another consideration when it comes to credit union rates. Generally, larger loans can sometimes carry higher interest rates because they pose a greater risk for the lender. They have more to lose if the borrower defaults on the loan.
On the other hand, borrowers with smaller loan amounts may be able to negotiate a lower rate of interest with their credit union. This is because lenders may be more willing to offer incentives in the form of reduced interest costs when there's less risk involved.
The borrower's creditworthiness is also important to consider when it comes to credit union rates. Lenders look at a person's credit history and score as part of their risk assessment process.
Consumers with higher scores and longer credit histories will typically have better rates than those with blemishes on their credit reports. The reasoning behind this is that a borrower with a good credit history has proven to be more responsible when it comes to managing their finances, which makes them less of a risk.
Some credit unions may offer additional incentives such as reduced rates for borrowers with high credit scores or rewards programs that reward borrowers for keeping up their end of the bargain by making timely payments.
By understanding these factors, credit union members can make more informed decisions when choosing a loan product and ensure they get the best possible rate. Remember, shopping around is always an important step to take when selecting a loan, regardless of the interest rate offered by your credit union. This way, you can ensure you're getting the best deal possible.