Credit unions are the financial institution that provides support to a very specific part of the community. The interest rates are considerably lower than the other alternatives, such as banks and private lenders. Also, the funds are easier to access because of the relaxed eligibility loans.

However, these institutions are not the first choice of borrowers for lenders as they have some drawbacks. Even though the approval process is short, very few people can apply for it.

Here, we will discuss the reasons to find alternatives for credit union loans for people amid financial distress.

• Membership Constraint

You need to be a part of the credit union to avail its services. It is not as simple as opening a bank account with only the documents in hand. You become the co-owner of the credit union with some powers in hand.

They give you voting rights on important issues like any other organisation and its co-owners. They will also provide you with the dividend for a successful financial year. However, they will not treat you as a customer, even if you want a loan.

• Limit Branches

The limited number of credit unions is a significant inconvenience for its users. You may have to travel a considerable distance to attend a simple meeting that requires your vote. Also, the transactions can be tedious work in the absence of online payments.

The private lenders approve your loan request online with 24 hours loan disbursement. Banks have branches spread throughout the country, with at least one near your neighbourhood. For the credit unions, they operate in a very small area for limited members. 

• Very Few ATMs

Similar to the branches, the ATMs are very few that too in a limited area. This increases the trouble when you want to perform simple tasks such as withdrawal, balance enquiry, and password change. Also, the credit union cards are not always accepted by the ATMs of other banks.

The best solution here is the banks with the universally accepted ATM or debit cards. Forget the local ATMs. You can use them for transactions around the world. The private lenders can provide you with doorstep loans if you want money without stepping outside.

• Fewer Services

Credit unions offer fewer services to its member with a little difference in their terms. The focus is on the personal and short-term business loan to avoid transactions that involve grave risk. Therefore, they might not serve your purpose like a bank or private lender will do.

Take the example of business loans. Both banks and private lenders will offer a considerable amount based on your eligibility. The services also come with discounts and coupons on spending. A credit card from a bank may provide you access to some travel tickets or airport lounge at no extra cost.

• Unreliable Online Services

Credit unions are not-for-profit organisations with limited working capital. You cannot expect them to spend millions on new security technology to provide the safest environment for online transactions. Also, the websites are the only digital service they may offer to the members.

On the other hand, banks are making a considerable profit that allows them to invest in the latest technology. They have websites, mobile applications, and text message services ready to answer the customer’s demand. For private lenders, they generally use banking services to transfer funds and deduct automated payments.

• Customer Support

You are a subscribed member of the community in a credit union, not a customer. The other members will offer the best services and may decide in your favour more often. However, they may not hire professionals to answer your grievances anytime you encounter one.

There is some bright side to the absence of customer support in a credit union. You can communicate directly to the president if you find some shortcomings in the current processes. You will have the power to vote based on your experience to eliminate the problem.

As mentioned above, banks have a vast number of resources to please their customers. They provide 24*7 support through different communication channels such as call, email, and social media. The private lenders have better customer satisfaction rate since they provide personalised solutions to the customers.

• Mentorship

The members of the community may help you with their experience if you want to start a business. But there is no guarantee for mentorship as they are not obliged for it. Also, the community members may not have expertise in your line of work.

You get assured mentorship programme from when you take business loans from some banks. Many private lenders also help their customers with some financial guidance. They help you with the cash flow, financial forecast, and elaborated business plan.

To Conclude

In the end, the financial benefits of credit union loans are quite evident with lower interest rates and processing fee. You need to decide between comfort and cost. However, some people are not an option because of the absence; there are no credit unions in their locality.