What type of organization is a credit union?

A credit union is classified as a nonprofit cooperative that allows its members to borrow at low interest rates. This structure is fundamentally different from traditional banks, which are for-profit institutions.

The nonprofit nature of credit unions means that any profits generated are returned to members in the form of lower fees and interest rates on loans, rather than being distributed to shareholders. This member-focused approach encourages community involvement and support, which is a hallmark of credit unions. The cooperative model allows members, who are also the owners, to have a say in the operations and decision-making processes.

Additionally, credit unions typically have a mission to serve their members and enhance their financial well-being, often leading to more favorable terms on loans compared to for-profit institutions. This characteristic makes them particularly appealing to those looking for affordable borrowing options.