Credit unions and community banks have risen in popularity over the last few years, especially among millennials who are looking for an alternative to big traditional banks. These institutions offer a number of key differences from traditional banks. Many people find them preferable to banking with large companies like Wells Fargo or Bank of America. But, what about student loan refinancing? Should you look for a local credit union or a big bank when it comes time to simplify and lower your student loan expenses?
Reasons to Refinance Through a Credit Union
Considering using a credit union to refinance your student loan debt? Here are a number of reasons why people generally choose to do so.
Credit unions and community banks are usually non-profit organizations. Unlike large lenders, which are almost universally for-profit public companies, most credit unions are “owned” by their members and don’t have a typical corporate structure or profit motive.
This could mean practical differences in the business practices of the institution. Or, it might just mean a warm-and-fuzzy feeling of banking with the “little guy”. But, either way, it’s a major draw for many lenders.
Because credit unions are non-profit, they’re known for being more lenient and less harsh on fees and penalties imposed. This may mean that you’re able to make a late payment every once in a while if something comes up. Or, you’re able to pay off your loan early without having to worry about paying a penalty.
Note that the specific terms and fees associated with your loan will depend on the institution that you’re working with. Be sure to check with them and read the fine print.
Local options, personal service
Ever wanted to just drop your student loan payment off at an office, rather than shipping it off to some faceless P.O. box? With a credit union, you may be able to do that. If you refinance locally, you may be able to build a strong relationship with your local institution.
This may also mean that when you have questions about your loan or are having trouble making a payment, you can simply walk into the branch and speak face to face with the loan officer. Many students who borrow from big lenders complain about poor customer service and long hold times when they need to call in to ask a question. This can be a major advantage for some students.
Because credit unions are less corporate and generally small in scope and operation, they are often able to use more personal discretion when writing loans. This won’t happen in all cases. But, if you’ve built up a strong relationship with a local credit union, they may be able to get you better terms or offer you certain benefits that you may not qualify for at other institutions.
Things to Consider About Credit Unions
Although credit unions can be a great option for many graduates looking to refinance their student loans, they’re certainly not the right choice for everyone.
Slightly higher interest
If you’re looking for bottom-dollar interest rates, then credit unions may not be able to offer you the best deal. Obviously, each credit union will have its own terms and rates available. Because credit unions are smaller and can’t absorb as much risk, they will have slightly higher rates than larger lenders.
This may not be the end of the world though. Interest rate is a very important consideration in your refinance decision, but there are other factors like unemployment protection and extra fees and penalties that are also important to consider.
Loss of protections
As with other student loan refinancing options, if you are planning to consolidate or refinance federal student loans through a private lender, you may lose some options and protections that are offered on federal loans.
Things like deference, forbearance, or income-based repayment may not be an option for you if you refinance through a private lender. So, carefully consider the pros of refinancing with the risk of losing these protections before making a final decision.
Finding a Credit Union to Refinance Your Student Loans
If you’re looking to refinance your student loans through a credit union, here are some options for you.
Local credit unions
In nearly every city and every state, there are local credit unions and community banks. Some are associated with specific employers or certain professional or other types of organizations, others are open to the public.
Alliant Credit Union
Alliant is a national credit union that is available even if there isn’t a local branch near you. Become a member by either working for a qualifying employer, being a member of a qualifying organization or by donating and becoming a member of Foster Care to Success, an organization that helps provide foster care to teens and children.
LendKey is a credit union comparison shopping site that will help you get estimated refinancing offers from a number of national credit unions.
Credible is a multi-lender marketplace that allows borrowers to receive competitive loan options from its vetted lenders, in 90 seconds.