If you’ve fallen in love with a vehicle, finding a loan is the next step to making it yours. With interest rates averaging around 7 percent for new vehicles in 2023’s third quarter, according to data from Experian, it’s wise to look for ways to save.

One potential money-saving route is to secure an auto loan through a credit union. Credit unions often boast lower interest rates than banks. Credit union loans for new vehicles with 60-month terms offer rates averaging 0.68 percent lower than banks, according to the National Credit Union Administration.

Two of Bankrate’s top picks are Skyla Credit Union and Penfed Credit Union. Skyla offers a more flexible underwriting process, while PenFed is better suited for extended loan terms. And both are good choices if you’re looking to refinance your current auto loan.

Skyla vs. PenFed at a glance

Skyla PenFed
Bankrate score 4.4 4.4
Better for
  • Flexible underwriting criteria
  • Minimal fees
  • Car-buying service
  • Wide range of loan terms
Loans offered New and used financing, auto refinancing New and used financing, auto refinancing
Loan amounts $3,000-$150,000 Up to $150,000
APRs 4.75%-16.50% Starting at 5.24%
Loan term lengths 48-84 months 36-84 months
Fees No fees Late fees and returned payment fees
Minimum credit score No minimum Not specified
State footprint All states All states
Time to funding Not specified Not specified
Autopay discount? No Not specified
Refinancing restrictions Max vehicle age 15 years Must have fewer than 125,000 miles

Skyla Credit Union
Best for flexible underwriting criteria

Skyla Credit Union

Rating: 4.1 stars out of 5
4.1
Learn more in our Bankrate review
  • Green circle with a checkmark inside

    Pros

    • Wide loan amount range: Skyla allows you to borrow as little as $3,000 up to a high maximum of $150,000.
    • Competitive interest rates: A starting APR below 6 percent is hard to find in this credit environment.
    • 24/7 support: Skyla offers around-the-clock customer service for its borrowers through its 24/7 phone support.
    Red circle with an X inside

    Cons

    • Small maximum term: Most lenders, including PenFed, offer financing terms up to 84 months, but Skyla only has loan terms between 48 to 72 months.
    • Unspecified refinancing requirements: Lenders usually share several requirements to qualify for refinancing, but all Skyla shares is a maximum vehicle age. If you are planning to refinance your vehicle with Skyla, you may have to apply and go through a hard credit check to judge your eligibility.
    • No option to prequalify: Prequalifying for your auto loan helps provide an estimate of what you will be expected to pay without taking a credit score hit — a perk not offered by Skyla.

PenFed Credit Union
Best for a wide range of loan terms

PenFed Credit Union

Rating: 4.4 stars out of 5
4.4
Learn more in our Bankrate review
  • Green circle with a checkmark inside

    Pros

    • Vehicle shopping assistance: PenFed’s car-buying service, powered by TrueCar, has an extensive inventory of new and used cars to assist in shopping.
    • Prequalification: Unlike Skyla, you can prequalify to check your rate without undergoing a hard credit check.
    • Refinance up to 125 percent: Those refinancing their current loan can receive up to 125 percent financing on the current loan balance. Cash-out auto refinancing can help you pay off high-interest debt or cover emergency expenses.
    Red circle with an X inside

    Cons

    • Traditional underwriting criteria: PenFed uses credit score as the main factor when considering applicants, unlike Skyla, which has a more flexible underwriting process.
    • Several expected fees: PenFed enforces both a late fee and a returned payment fee in addition to other potential charges.
    • No autopay discount: Some lenders offer discounts for those who sign up for automatic payments, but neither PenFed nor Skyla does.

How to choose between Skyla and PenFed

Both Skyla and PenFed offer online applications and in-person branch support. Opt for Skyla if you need more flexible underwriting criteria, and choose PenFed if you want to use its car-buying service.

Choose Skyla for flexible underwriting criteria

Most lenders use your credit score as the main factor to determine loan approval and rates. Those with poor credit tend to see more rejections and higher rates, but Skyla handles requirements differently. According to its site, it considers your employment, income and other financial assets along with your credit score.

This may help those without a lengthy credit history secure competitive interest rates. Buyers with a low credit score are unlikely to get the best possible rates. But even Skyla’s highest rates are far lower than the highest out there, which can top 20 or even 30 percent.

Choose PenFed if you want to extend your loan term

The choice to secure a longer-term auto loan comes with the perk of a less expensive monthly payment. But it means you will be stuck with a vehicle longer and pay more in interest throughout the loan. If monthly cost is your main consideration, PenFed has the edge.

It also advertises a minimum APR of 5.24 percent APR for an 84-month loan for borrowers who use its car-buying service. If you bought a $40,000 car with a $2,000 down payment, using that rate and term, you’d have a $579 monthly payment. A car loan calculator can help you weigh the monthly cost against the greater cost of interest.

Compare more lenders before applying

Skyla offers a friendly underwriting process for borrowers struggling to qualify elsewhere. PenFed is great for someone looking for longer loan terms. But before signing off on either loan, compare more auto loan rates to see what other terms you could qualify for.