…but didn’t know to ask!
Obtaining a personal loan from your credit union is like seeking a personal loan from any other financial institution. You’ll need the typical documentation, proof that you can make payments and intent of how you will use the loan (such as paying for vacations, weddings, new furnishings, emergencies and more).
While nearly every financial institution may offer different types of personal loans, every consumer may not know their options or what they should ask when seeking one. For example, do you know the differences between obtaining a secured versus unsecured loan? Why would you go to a credit union for a personal loan versus any other financial institution?
These questions (and more) can be answered by industry professionals, Jessica Roshek, Loan Manager at Genisys Credit Union ($1.4 billion, Auburn Hills, MI) and Wendy Rohrer, VP/Consumer Lending at Summit Credit Union ($1.8 billion, Madison, WI). Roshek and Rohrer’s credit unions offer unique lines of personal loans and both lenders bring their expertise and knowledge to every member meeting.
Secured or Unsecured Loan? That is the Question
The experts say deciding between a secured and unsecured loan should be based on the member’s financial needs, goals, and current situation. “Secured loans tend to have more favorable, lower interest rates with longer terms in comparison to unsecured loans, which generally have higher interest rates with shorter terms,” Roshek explains. “Secured loans can utilize collateral such as a vehicle, or a savings or certificate account for a pledge loan. At Genisys, pledge loans are an excellent alternative as they have the lowest rate, and do not require a credit report.”
Roshek adds that outside from the loan itself, credit reports play an important role in this decision making process. “If a member has quite a bit unsecured outstanding, they may opt for a secured loan to ensure their debt ratios are proportionate to their income.”
Is There a “Best Way” to Make Loan Payments?
Consumers constantly hear about the ease and convenience of making loan payments through automated methods, not to mention that some financial institutions will extend a bonus/discount to those who opt for ACH.
However, some consumers are still skittish about conducting any financial transaction online, so is it really worth it to go paperless?
“It is all based on personal preference,” Roshek says. “Some individuals prefer paying by check so they have a physical registry of their payments with their checkbook. Others prefer to set up the automatic payment for the convenience of not sending out a payment each month. At Genisys, AutoPay and having Direct Deposit can earn members a .25% discount on most loans, so this is often the most preferred method. Not only is the member able to have peace of mind that their payment will always be on time, but it saves them money with the interest rate!”
Regardless of how the consumer pays, Roshek says making on time payments should take priority overall.
“To be sure, the best way to pay back a personal loan is with on time payments, no matter which method is selected,” she insists. “This cannot be stressed enough due to the implications it can have on someone’s credit report by being just a few days late. In addition, the member ends up spending more than they need to if they incur late fees.”
“I would encourage electronic payments,” Rohrer says. “Whether the member wants to set up an automatic transfer from savings to their loan or an electronic payment via the online branch; by having electronic payments, its convenient for the member and provides them with peace of mind that the payment will be made on the day they specified.”
Are Loan Insurances or Add-On Products Really Worth It?
Roshek says, “Absolutely!” She explains that Genisys offers Credit Life and Credit Disability for all secured and unsecured loan products. “Credit Life pays off a member’s eligible outstanding loan balance in the event of the member’s death, while Credit Disability makes loan payments up to the policy maximum in the event of disability caused by covered injury or illness. The typical associated costs for both products are based on the loan amount and the monthly premiums decrease as the loan is paid down.”
“One of the fantastic aspects about Credit Life and Credit Disability is that the cost of the products is built into the monthly payment of any loan and usually costs a few cents per day depending on the loan amount,” Roshek continues. “This makes it affordable for our members and also gives them peace of mind to have extra financial protection.”
Another protective service Roshek says that members should consider when taking out an auto loan is Guaranteed Asset Protection. “If the member is using a vehicle to secure their personal loan, we also offer Guaranteed Asset Protection Plus (GAP Plus) to protect the vehicle in the event it is totaled or stolen and the insurance company’s valuation of the vehicle is less than the loan balance.”
Rohrer stresses the importance of open communication with the loan officer and being up front about how the member/consumer intends to use the money.
“I would encourage the member to listen to their loan officer and ask about the advantages protection will offer them,” she says. “We offer payment protection, which is a debt cancellation product, which will protect the member during an unforeseen circumstance. Together with the loan officer, the member should determine if that’s something they may need in the future or whether they already planned for unforeseen circumstances and can make decisions from there.”
“Additionally, there may be different levels in a package and the member only needs a portion of it,” Rohrer continues. “The only way the member will know for sure is to communicate with the loan officer.”
What Should Consumers Know Before/During Loan Origination?
Consumers should make a credit report check a priority before applying for a loan. “One of the most important things a member should do is check their credit report for accuracy,” Roshek says. “They can obtain a free report from the three main bureaus, TransUnion, Experian, and Equifax from www.annualcreditreport.com every year. It’s best to stagger the requests so they can have a report every few months, just to ensure everything is on the report that should be there so they get the credit they deserve. Likewise, it is best to make sure there are no issues with items reporting incorrectly. This could mean a difference in what they will pay in interest rate, so it’s always a good idea to make sure their credit report is correct.”
Another important tip is to save and budget, Roshek says. “Many individuals apply for a personal loan when it is too late and they do not have the funds to even repay the loan they desperately need. By setting aside some money every month and paying themselves first by maintaining a savings account, they will be in a better financial position to borrow responsibly.”
Rohrer agrees that members should consider their budget and how much they can afford to pay each month. “Knowing what will fit into their budget will help them keep their financial goals in the forefront of their mind as well.”
Why Should Consumers Consider a Credit Union for a Personal Loan?
One main reason why consumers should explore credit union possibilities is that the interest rate alone on a personal unsecured loan from a credit union is more cost efficient for members. “Occasionally, there are special personal loans that are offered throughout the year at Genisys, such as the Summer and the Holiday Loan, which offers a lower rate than is typically offered on personal loans,” Roshek says. “Many large financial institutions require borrowers to have a certain amount of cash liquidity in their account before lending any amount unsecured, so it is not uncommon to be turned away from those places.”
Rohrer adds that many credit unions may offer specialized programs such as Summit’s Share and Certificate Secured Loans. “The member can borrow against his or her deposit balance for a lower rate and is a great way to build or rebuild credit,” she explains.
Additionally Summit has established a unique loan partnership with area businesses to help customers with financing. “Our credit union partners with local community businesses to provide unsecured financing for certain products,” she says. “For example, we partner with a local, high-end bicycle store to finance bikes and equipment for the store’s customers.” She says that the credit union partners with four area businesses to provide finance opportunities.
Need some cash to cover unexpected repairs or get a “Tour de France” racing bike? Find a credit union and inquire about its line of personal loans today.