It’s been a difficult decade for community banks in America. Many didn’t survive the crushing blow leveled by the financial crisis in 2008. Many others were bought up and absorbed into larger, regional banks. Those that survived are stronger for it and more dedicated than ever to serving the local people and businesses of their communities. That remains one of the hallmarks of community banks and why they still hold a strong appeal for consumers tired of the impersonal treatment at the hands of the big banks. They work harder to earn your business, offering superior customer service on top of competitive loan and deposit rates.
As the market for personal loans begins to heat up, an increasing number of community banks are once again starting to offer them. Your chance of obtaining a competitively priced personal loan from a community bank increases when you have a banking relationship with one. There are a number of reasons why you should consider a banking relationship with a community bank, if not for a personal loan then for all of your other banking needs.
If you are going to consider a personal loan from a community bank you should first consider whether it could be the right banking choice for you. Although it’s not required to have an existing relationship with a community bank in order to get a personal loan, it can help. Community banks are all about supporting their local population – it’s how they build their business. Although it doesn’t guarantee you’ll get a loan, you may find the experience refreshingly different from working with a big bank. Here are the pros and cons of working with a community bank.
Community Bank Pros
More Flexible Lending Guidelines
When you apply for a loan with a traditional bank your application is sent up the ladder to some faceless underwriter in the corporate office. That underwriter, who doesn’t know you, must adhere to strict guidelines, making it difficult for customers with a blemish or two on their credit report to qualify for a low loan rate. Community banks make all lending decisions on a local level, taking into consideration the unique needs and circumstances of their customers. Some community banks go beyond the application to consider your character, family history, and your relationship with the community.
Lower Fees and Better Rates
Very often community banks charge lower fees on banking products than the big banks. Typically, checking accounts from community banks are less expensive than those from national banks. On top of that, the checking accounts at community banks usually come with more features. If you’re looking for an edge with your savings, the interest rates at community banks are also usually higher than the big banks.
Much Better Customer Service
The big banks have set a low bar when it comes to customer service, which is one of the biggest reasons consumers are leaving them. At a community bank you are more likely to be treated as more than just an account number. Service is more personalized and typically much faster. If you apply for a loan they take the time to know you as a person rather than just a credit score.
Community Bank Cons
A Little Behind on Technology
Community banks have historically been slow to adapt to technology. They just don’t have the IT budgets that the big banks have. As far as their back office systems and processes they are up to speed with electronic transfers and Automated Clearing House, but they may be a bit behind when it comes to online and mobile banking. While many more are offering it, they may not be quite as robust as what you would find with a big bank.
Limited Financial Products
With a community bank you might not get everything you need. Most community banks offer checking and savings account options, but they may be somewhat limited in other financial products such as retirement accounts. Most community banks offer home and auto loans, but may not offer personal loans.
Many community banks have just a few branches in the local area. If you need access to a branch away from home, you’re out of luck. Many community banks do belong to large ATM networks which allow you access to your cash without paying a fee.
Personal Loans Offered by Community Banks
There was a brief period after the financial crisis when the vast majority of community banks stopped offering personal loans. One reason is that capital became very tight for smaller banks and they had to reserve it for their mortgage and commercial loans. Personal loans are unsecured, meaning they are a higher risk than loans secured by collateral. Smaller banks couldn’t afford to take such risks while they worked to rebuild their secured loan business. That is beginning to change with an increasing number of community banks now offering personal loans again.
For the community banks that now offer personal loans, they are typically for loan amounts between $2,500 and $35,000. Loan terms can range between 12 and 72 months and the APRs currently range between a low of 6 percent on up to 15 percent. Most personal loans have no restrictions on how the funds may be used, with debt consolidation being the most popular reason for obtaining one.
Here’s a sampling of some community banks from around the country and their personal loan offerings:
Community Bank N.A.
With more than 230 customer facilities through Upstate New York, Western Massachusetts, and Northeastern Pennsylvania, Community Bank N.A. is more regional in size but works at maintaining its local identity. It currently offers a 60-month personal loan with a 6.14 percent APR. That is among the lowest in our sampling. All loan decisions are made in-branch.
1st Colonial Community Bank
With just two branches in and around Collingswood, New Jersey, 1st Colonial Community Bank is definitely local. Its best rate on an unsecured loan is currently 8.50 percent. Loan decisions are made quickly in the branch.
Union Community Bank
Serving Lancaster County, Pennsylvania, Union Community Bank has 14 branches. It is part of the AllPoint ATM network with more than 48,000 surcharge-free ATM locations nationwide. It offers personal loans for up to 36 months, but its APR is currently higher than most at 14 percent.
Central Valley Community Bank
Starting out as a single branch in Clovis, California, Central Valley Community Bank serves the greater Fresno area. While it doesn’t offer any personal loans, it does offer an unsecured personal line of credit for amounts of $500 to $35,000. Rates are fixed currently starting at 8.15 percent.
As you can see, you never know what you’ll find at your local community bank. The one thing these four banks have in common is that none of them offer online applications. Loan applications must be submitted in the branch.
Author: Jeff Gitlen
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