Credit unions are owned by members, unlike banks, which are owned by shareholders. Credit unions also offer some of the most competitive home loans in Australia.
Credit unions are smaller, customer-owned financial institutions operating in towns, cities and regions across Australia.
For home buyers and property investors, getting a credit union home loan means banking locally and avoiding the Big Four banks while still getting a good deal on a home loan.
Because credit unions are smaller operations, it's a good idea to research one thoroughly before becoming a customer. But that's true of any financial institution.
What is a credit union?
Credit unions are member-owned financial institutions that offer banking services like loans, bank accounts and credit cards. They are essentially banks, and many have the word bank in their names.
But unlike the big banks, credit unions are owned and run on behalf of its members (customers) rather than shareholders. Some credit unions charge a nominal membership fee of $1 when you join.
The Customer-Owned Banking Association (COBA), lists 53 credit unions as members.
Bank loans vs credit union home loans
Credit unions
Owned by customers. While bank profits are distributed among shareholders in the form of dividends, credit unions re-invest profits for their members.
Limited branch networks. Credit unions tend to be local institutions. Some cover states, cities or regions. But they don't have the same extensive branch network as the big banks.
Community benefits and support. While every credit union is different, they tend to put profits back into specific, local causes.
Specialised memberships. These days most credit unions are open to anyone. But some still serve specific professions.
Regulated like the banks. Credit unions, mutual banks and building societies are Authorised Deposit-taking Institutions (ADIs), the same rules that govern the big banks.
Banks
Owned by shareholders. Banks are run as for-profit entities with legal obligations to their shareholders.
National branch networks. Australia's Big Four banks obviously have national branch coverage. For borrowers who need in-person service, this is a big advantage.
Corporate social responsibility. Banks also have a range of causes they support, but these initiatives tend be broad and not local.
Open to all customers. The big banks don't restrict their customer basis depending on your profession.
Banking apps. When it comes to online banking and apps, the big banks tend to have the best services.
Stability. While Australia's credit unions are stable and regulated like the banks, the biggest banks are obviously the largest and most successful lenders.
To get more information about the various customer-owned banks (including credit unions, mutual banks and building societies), check out the Customer Owned Banking Association website.
The benefits of getting a home loan with a credit union
Bank local
If you want to support a local institution rather than one of the Big Four banks, then a credit union is probably your best bet. It's the financial equivalent of shopping local.
The fact that credit unions often put money into local community projects and charities is another benefit.
Member benefits
Credit unions are run on behalf of their members. And many credit unions started out by servicing specific areas or specific professions.
If you're a teacher, for example, you may find a teacher-specific credit union offers extra benefits suited to your work and finances.
How do I find the best credit union for me?
To find the credit union that works best for you, ask yourself the following questions:
Does it have the products you need? Some credit unions offer an extensive suite of financial products, from credit cards to home loans to insurance. Others may offer a more limited set of banking services with only a few home loans to choose from.
Does the credit union operate where you live? Some credit unions only operate in one town or city. You don't need to be living there to bank with them, of course. But if you want personalised in-branch customer service, you want to find a credit union where you live.
How does the credit union support the community and its members? Consider the credit union's community work, the projects it supports and the benefits it offers to members.
Customer reviews. Reviews from existing customers is a good way to gauge how good a credit union is, especially in terms of customer service.
Can I get a lower home loan rate with a credit union?
At Finder we track the market's lowest home loan rates every month. And lately, most lenders are offering quite competitive rates. There's very little distance between the Big Four banks, online lenders and credit unions.
We frequently find credit unions and small lenders offering some of the lowest rates around.
Getting a loan with a credit union doesn't mean you're guaranteed to get a better deal, but it doesn't mean you're missing out either. Once again, you need to compare and make sure you're getting a good rate.
Frequently asked questions
Credit union loans are financial products offered by member-owned institutions. They typically provide lower interest rates and fees compared to traditional banks. Credit unions focus on serving their members rather than generating profits for shareholders, which can result in more personalised service.
The size of the loan you can get from a credit union depends on your financial situation, credit history and the credit union's lending policies. Some credit unions may offer loans up to 95% of the property value, similar to traditional banks, but this can vary widely.
The best credit union for you depends on your specific needs, including the loan products you're looking for, the type of customer service you want and your location. Some of the well-regarded credit unions in Australia include CUA (now Great Southern Bank), People's Choice Credit Union and Bank Australia.
Sources
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Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University.
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