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The Logic Behind CU Lending

You may think of a credit union as a member-owned financial cooperative. It is created and managed by its members, and profits are shared amongst the owners. A credit union is organized under a specific affiliation, be it a company, a region, or some other special relationship shared by its members. Credit unions offer many of the same financial services as banks. CU lending products may include car loans, home loans, personal loans, and others.

Credit Unions Focus on Members
Credit Unions are not-for-profit financial institutions. Rather than offer loans and other financial products that concentrate on earning a profit for the institution, as banks do, credit unions offer only those products they feel would be of benefit to their members. This approach results in a focus on consumer loans and services. Credit union earnings translate to:

  • Higher savings rates for members
  • Lower interest rates on loans

While credit unions follow many of the same guidelines and practices as banks, some of the vocabulary is different. For example, in a bank, customers make deposits. In a credit union, members invest in shares.

Responsible Financial Practices
While it may be true that credit unions prioritize service over profitability, it does not mean they are not concerned with making sound financial decisions. Just like any successful bank, a credit union must collect revenue, pay salaries for personnel, and compete with other lenders who offer the same or similar products. Oversight for a CU is provided by a Board of Directors. The Board is made up of elected volunteers who ensure that the credit union stays true to its principles and goals.

One notable difference between a credit union and a bank is cooperation between institutions. CU’s frequently work with one another and utilize tools to improve consumer lending and share resources in order to better meet their members’ needs. Whether it is a question of convenience, savings, or both, the bottom line rests with the service you get and your satisfaction as a member. Credit unions are invested in long-term relationships with their members.

Protected Assets
Similar to banks, member shares are federally insured, although the insurance is provided by a separate government agency. While bank deposits for individual customers are insured to at least $250,000 by the Federal Deposit Insurance Corporation (FDIC), credit union members’ shares are covered up to the same amount per member by the National Credit Union Administration (NCUA).

Types of Lending
The variety of loans offered depends on what the individual CU believes is most beneficial to its members and to its operation. Some of the most prevalent products include:

  • Auto and recreational vehicle loans
  • Home loans
  • Home equity loans and lines of credit
  • Construction loans
  • Personal and lifestyle loans
  • Credit cards

You may apply for a personal or lifestyle loan to cover a wide range of needs. These types of loans may be closed-end, with a specific repayment schedule, or open-ended, functioning as a line of credit. You can use this type of lending to pay for medical expenses that exceed insurance coverage, orthodontics, vacations, weddings, funerals, debt consolidation, or any of life’s unpredictable offerings.

The idea behind credit union lending, and credit unions themselves, is to provide financial support to individuals through thoughtful resource management and responsible lending. In essence, members are creating a cycle of financial sustainability by pooling their resources and using the money to lend to and borrow from one another when the need arises.

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