Credit unions are a good option when looking for ahome equity loan. Even if you don't think you qualify to join one because you lack a particular professional affiliation, you may be surprised. Some let you join just because of where you happen to live.

Credit unions are getting more attention these days, mainly because most of them managed to avoid the subprime lending crisis that's hurting their financial counterparts at traditional banks. Why that matters to the average consumer may not be obvious on the surface, because credit unions and banks still offer the same basic products and services. But there are differences that are becoming more pronounced, as banks and mortgage companies hunker down in ways that credit unions aren't forced to.

Thanks to these differences, borrowers can benefit when shopping around for a home equity loan. Other lenders that have incurred big losses or taken write-downs related to subprime mortgage defaults have anemic capital reserves, so they've tightened their purse strings. As their cash on hand gets depleted, their willingness to lend diminishes. As a result, they charge higher rates, more fees, and require better credit and more proof of income.

Fewer home equity loans available

While the changes may seem insignificant to some, getting denied a home equity loan is no small matter. The same credit score that qualified you last year may disqualify you in 2008. The value of your house will also be scrutinized more closely, and if there's any leeway in evaluating its value, it will likely favor the lender, not you. Some lenders do two appraisals, for instance, and then take the lowest valuation to figure out how much equity you can borrow.

Credit unions to the rescue

Credit unions aren't as picky as traditional lenders, not because they're lax, but because they have more money to lend, thanks to healthier balance sheets. According to Datatrac, a market-research firm that follows trends regarding various financial products, credit unions are paying slightly higher rates on certificates of deposits. Some of their mortgage loans are even available for a full percentage point cheaper than those offered by regular banks. You may find that a credit union charges you less, but pays you more. That's a formula for surviving a recession that every American consumer can cheer about, and identify with, in this challenging economic climate.

Plus, credit unions have a different approach to the business of lending because they're established as not-for-profit enterprises to serve their members, not as profit-focused institutions more beholden to shareholders than they are to their own depositors. You must be eligible to join a credit union, but membership requirements have lessened considerably. Nowadays, you may be able to join a credit union just because you live in a particular state, regardless of where you work or what organizations you do-or do not-belong to.

    Published on May 27, 2008