How to find the right credit union?

Question

I have 3 months left in grad school, currently with about $50,000 in student loans (most of it at 6% interest). I also need to finance or lease a used car. Suppose I select a car with a sticker price no higher than $20,000.

I have no other debt, and a spotless credit history (I don't know my actual FICO). I'm 29 years old and have no dependents. My degree is highly technical and in demand. I've already secured a job for after graduation, with a base salary of $85,000 plus bonuses (assume 10%+). The line of work has reasonable career advancement opportunities (i.e., I expect more than "cost of living" raises). I also have $25,000 in cash, which is for living expenses over the next few months, moving after college, etc. The remainder I will use to pay down debt, leaving enough so I don't end up living paycheck-to-paycheck. I feel I'm a decent candidate for credit. I'd like to make the best financial decisions possible.

1) Are credit unions a good option for me? Particularly with respect to refinancing my student loans and helping finance or lease a decent car. Are credit unions likely to offer me membership?

2) How do I select an appropriate credit union? My father is a member of some credit union that was serving his teachers union. Besides that, I have no ties to any credit unions, associations, community networks, etc. My line of work is investment management and I will be living in the Los Angeles area after graduation.

Please let me know if more information is required for feedback.

Thank you!

Answer 1

Traditionally, you wouldn't have a lot of choice in credit unions; they're supposed to be focused on a specific population, rather than having completely wide-open membership. That usually was employees of a particular company and immediate family thereof. These days many credit unions have switched to a "community" model, but even so you're going to have fewer choices in CUs than in banks.

You could probably join your father's CU under his sponsorship. Or there might be one associated with your new employer. Or your alma mater. Or your community -- current, or where ever you move to. You'll have to do a bit of groundwork to find out what your options are.

Note that once you are a member, you can change jobs or move or whatever while retaining your membership. I'm still banking out of a credit union that I joined when I took my first job, despite it being a four-hour drive away. Bank-by-mail, bank-by-web, ATM, and EFT cover most of my needs. For the few cases where I've needed a bank check, I've taken advantage of the"shared branch" network whereby participating CUs let you use their tellers to perform transactions at other participating CUs (thus partly overcoming the limitations of having limited branches of their own).

For the most part, credit unions are what banks used to be: Savings-and-Loan institutions. Their reason for existing is to use the savings of some members to make loans to other members, and use the interest on the loans to pay interest on the savings. That doesn't necessarily mean they're more likely to approve you, or that they can offer you a better rate... but it means they're more likely to be flexible, and they're often more pleasant to deal with. They remember that their job is to serve their customers, not to maximize bank profits.

CUs are insured in much the same way banks are insured -- and last I heard, their insurance fund was actually in better shape, since they were less involved the mortgage crisis.

Outside of the membership restrictions, you really can treat them as a smallish, unusually friendly, bank.

General rule of thumb: It's almost always worth joining a credit union when you can, since you can take that membership with you and it gives you another resource to work with. Whether you use it as your primary bank or lender is something you can decide later.

But as I say, I joined two CUs, dropped one 20 years later, am still mostly banking out of the other... and while I didn't get my mortgage from them, they and one small local account (mostly to dump accumulations of pocket change into) have met my needs.