Banks or Credit Unions?

Question

I'm just beginning to build my property investment portfolio. As a beginner, which should i choose to open my investment portfolio account with? Should i go with a bank or with a credit union? What are the pros and cons to both, if any?

Richard C. · Answer

I use a credit union.

However, you need to be aware of one potential downside.  Nothing you do with a credit union is non-recourse.  Have a CU credit card and fall behind?  They'll hit your savings account.  Have a mortgage loan they retain and service, and fall behind?  Don't be surprised if your checking account gets wiped clean.

James Syed · Answer

If you get better terms and conditions at a bank, go with a bank and if a credit union gives  better term and conditions, go with them. Contrary to poplar believe  that credit unions are better than bank, let me advise you that it's NOT case all the time.

Usually small community bank / portfolio lender is your best bet.

Hope it helps.

John Blackman · Answer

When you get credit inquiries there is a certain grace period while you're shopping.  It will have a minor ding on your score, but as long as you finish shopping inside 30 days, your credit should recover in a few months.  YMMV.

When we were establishing our banking relationships and dating banks (at least 1-2 a month for a year), my credit probably dropped by about 40-50 points.  In the year afterward, it came back up to where it was before that.

I tend to open my accounts with whomever is giving me a loan, so we use many banks.  I keep track of them all with One Note.

Patrick Jacques · Answer

How many credit unions should I approach?  If they all pull my credit, wouldn't that ding my credit score and/or history?

Ralph Santos · Answer

@Zachary Steinke....That's correct. The more options the better.

Zachary Steinke · Answer

I realize that you were asking about just banks and credit unions, but I would not rule out a mortgage broker or banker. Their lending is more transparent than either banks or credit unions. At any given time, any one of these four options could give the lowest interest rate.

Cori Leste · Answer

@Andy Wong: I agree with everything you said. I just wanted to point out that ING was recently acquired by Capital One, so if you're looking to avoid the big banks, you may want to look elsewhere.

Seth Williams · Answer

To @Andy Wong's  point, credit unions are able to give much more favorable interest rates because they are not-for-profit organizations, which means they don't pay federal taxes.

It's really kind of an unfair advantage that credit unions have over banks (and this is part of why banks have a really hard time competing with them)...   but it can definitely work to the borrower's advantage, because credit unions can use this to offer significantly cheaper money to their customers.

In my limited experience, I've noticed that my credit union isn't quite as "business friendly" as most banks are. They just don't have the infrastructure or systems in place to meet the needs of the typical business operation (they're geared more towards consumer loans and such), but I think some credit unions are better at this than others.

For the purpose of getting mortgages and the like, I think it's hard to beat what a credit union can offer.

Banks or Credit Unions?

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