The fact that auto loans from credit unions continued to grow during the first quarter is good news for at least a few credit challenged car buyers
Here at Auto Credit Express we believe that although it can often be a shot in the dark, car shoppers with bad credit that belong to a credit union at least owe it to themselves to check this option out first.
That’s because while going this route isn’t always successful, we have seen situations in which credit-challenged consumers have received an approval for a car loan from their credit unions.
We were reminded of this fact earlier today while reading a press release from the National Credit Union Administration (NCUA) – an independent federal agency created by Congress to regulate, charter and supervise federal credit unions.
NCUA 2014 First Quarter Report
“The continued growth in credit union lending and gains in membership during the first quarter are positive signs,” NCUA Board Chairman Debbie Matz said. “Investing in people and communities will produce dividends for credit unions in many respects…”
The report, which was issued on June 3rd, was based on data submitted to and compiled by the agency for the quarter ending March 31, 2014. Compared to the first quarter of 2013, the first quarter of 2014 produced the following results:
- New auto loans grew 13.9 percent to $73.5 billion
- Used auto loans increased 11.3 percent to $130.1 billion
- Membership in federally insured credit unions grew by 831,635 in the first quarter of 2014, reaching a new high of 97.1 million
- The overall loan delinquency ratio fell to 0.81 percent from 1.02 percent in the first quarter of 2013
- The net charge-off ratio for all loans was also down from a year earlier
The Impact on Buyers with Problem Credit
All this sounds good, however car buyers with poor credit still need to understand a couple of important points:
1. Although credit union auto lending is in good shape with reasonable lending rates, a large majority of these lenders don’t do business in the subprime lending market
2. Credit unions are typically more selecting in approving loans and are more likely to consider applicants with situational problem credit versus those with habitual poor credit.
With that in mind, we suggest that applicants:
- Know what’s in their credit reports and at least one of their credit scores.
- Choose an affordable vehicle with a monthly payment that is, at most, 10% to 15% of their gross monthly income (the lower the better).
- Credit unions typically put a lot of stock in equity – so the higher the down payment, the better.
The Bottom Line
The latest report from the NCUA shows that credit unions continue to increase their share of vehicle lending. The issue that buyers with damaged credit face is that credit unions, as a rule, don’t buy as deeply as subprime lenders. But having said that, it never hurts to give your local credit union a first shot for a car loan.
One more tip: If you get turned down at your credit union or local bank, we want you to know that Auto Credit Express matches people with credit difficulties to those new car dealers that can offer them their best opportunities for auto loan approvals.
So if you’re ready to reestablish your credit, you can begin now by filling out our online car loan application.
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