Final answer:
Service cooperatives such as credit unions provide low loan interest rates to their members. These not-for-profit financial institutions are geared towards offering better rates and benefits, varying from about 6%-10%, as they are owned by the members they serve.
Step-by-step explanation:
Service cooperatives, such as credit unions, often offer low loan interest rates for their members. These institutions are owned and operated for the benefit of their members, which can include teachers' unions like the El Paso Area Teachers Federal Credit Union, military personnel with Navy Federal Credit Union, or government employees with the Government Employees Credit Union (GECU). The idea is that as these cooperatives grow in membership, they leverage increased influence to procure better rates and benefits for their members. Additionally, these financial institutions tend to offer better rates than traditional banks because they function as not-for-profit entities. For example, rates at credit unions can vary but may range significantly lower, such as between 6%-10%, compared to traditional for-profit banks.
The principle behind credit unions offering lower interest rates is similar to market competition influencing rates. When there is an above-equilibrium interest rate, firms, including typical credit card companies, are keen to supply loans. However, if demand is low, these firms may reduce their interest rates or other fees to attract more borrowers, moving the rates towards equilibrium. Similarly, credit unions aim to serve their members and thus, typically, offer loans at rates lower than those offered in the general market.