You may be able to score a competitive rate for your next personal loan.
What is a credit union?
Credit unions are nonprofit organizations owned by its members, not a small group of owners. Despite this, they still offer many of the same products as traditional banks, but their rates are usually lower and their application criteria is less stringent.
Credit unions have a strong focus on their community of members and use a democratic approach when electing a board of directors. This board provides general oversight of the credit union’s functions and keeps the best interest for the credit union’s members in mind when making decisions.
Because credit unions are nonprofit, their earnings are put back into the members’ pockets — usually in the form of lower interest rates, reduced fees and better terms. This means that you may end up paying less for a personal loan from a credit union than you would from a bank or online lender.
Compare personal loans from some of the largest credit unions
|Credit union||Who’s eligible||Starting APR||Max loan amount||Other loan types offered|
|Navy Federal Credit Union||You must be 18 years or older, have a photo ID, provide income verification, show proof of residency and must have been affiliated with the Armed Forces, Department of Defense Coast Guard or National Guard. Immediate family members are eligible as well.||6.99%||$50,000||Mortgages, home equity loans, auto loans, leisure vehicle loans and student loans|
|PenFed Credit Union||You must be 18 years or older, have a photo ID, provide income verification, show proof of residency and must have been in any branch of the US Military or an employee of the Department of Defense or Department of Homeland Security or be affiliated with an eligible military association.||9.99%||$25,000||Mortgages, home equity loans, auto loans, leisure vehicle loans and student loans.|
|San Diego County Credit Union||You must be 18 years or older, have a photo ID, provide income verification and show proof of residency in San Diego, Riverside or Orange County in California. If you don’t live in these areas, you can still apply through the Financial Fitness Association.||5%||$20,000||Mortgages, home equity loans and auto loans.|
|Teachers Federal Credit Union||You must be 18 years or older, have a photo ID, provide income verification and show proof of residency in Nassau County or Suffolk County in New York.||5%||$20,000||Mortgages, home equity loans, auto loans, leisure vehicle loans and student loans.|
|State Employees Federal Credit Union||You must be 18 years or older, have a photo ID, provide income verification and show proof of residency in select areas of New York||6.24%||$30,000||Mortgages, home equity loans, auto loans, leisure vehicle loans and student loans.|
What sets personal loans from credit union apart?
Unlike many other lending institutions, credit union are nonprofits. This means their end game isn’t making profits for its shareholders, but instead providing its members with more competitive services.
Because of this, you’ll need to become a member before you can qualify for a personal loan from a credit union. Some credit unions offer membership to limited groups of people, so be sure to check if you qualify.
Credit unions vs. online lenders
Credit unions and online lenders typically have more flexible requirements than banks and are typically more friendly to online customers. However, credit unions often offer more competitive rates and come with the added benefit of personalized service — if you have any questions, you’ll be able to visit a branch and meet with someone in person.
Online lenders beat credit unions on two fronts: Turnaround time and ease of application. Online lenders can sometimes get you funds in as little as one business day. And you don’t have to become a member and open a new bank account to be eligible. As long as you live in a state serviced by the lender, you’ll be able to have money deposited into your bank account.
Credit unions vs. banks
Credit unions are much closer to banks than other types of lenders. They offer a wide range of financial services, including checking and savings accounts, CDs, retirement funds and multiple types of loans. The applications are typically more involved than online lenders and can take a few weeks to process.
The key difference between credit unions and banks is that credit unions tend to have less strict eligibility requirements, especially compared to international banks. They usually also have more information available online, often providing tables, calculators and other tools so you can estimate how much you’ll pay before you apply.
What types of personal loans can I get from a credit union?
While the exact type of personal loan you can get from a credit union will depend on what the credit union offers and your credit, most usually have a combination of three different personal loan types:
- Unsecured personal loans. Unsecured personal loans are by far one of the most common types of loans. You won’t have to put up any collateral, and if you have good credit and a regular source of income, you may qualify for a low interest rate.
- Secured personal loans. Secured personal loans are less common, but they allow you to put up collateral — usually a certificate of deposit or a savings account — that will act as collateral should you default. This lowers your potential interest rate and makes it easier for people with less-than-perfect credit to qualify.
- Payday alternative loans. Not every credit union offers payday alternative loans, but they’re slowly becoming more popular. If you’re in a crunch and need extra cash, usually between $200 to $1,000, a payday alternative loan from a credit union could save you hundreds of dollars in interest.
Not a member of a credit union? Compare these online personal loan options
Pros and cons of credit union personal loans
- Competitive rates. Because credit unions are nonprofits, they are able to offer competitive interest rates to their members.
- Bad credit loans. Some credit loans offer personal loans to individuals with poor credit. However, you may be required to apply with an eligible coapplicant or provide collateral.
- Nonprofit institution. Unlike banks, any earnings a credit union sees are redistributed to its members in the form of small dividends, low interest rates, smaller fees and other perks.
- Must be a member. In order to qualify for a loan from a credit union, you must first be a member. This means you may have to pay a nominal minimum deposit along with a membership fee.
- Slow turnaround. It can take a few weeks — or even longer — to receive your funds.
- Limited services. Many local credit unions only have a handful of ATMs and locations. While this might not affect your loan, you could have trouble accessing your checking or savings account if you move.
Consider these factors before applying
The APRs on personal loans are often higher than secured loan rates. If you’re able to provide some kind of collateral you may want to consider getting a secured loan. Your creditworthiness affects the APR you are offered, so if you have a poor credit rating you may want to postpone your plan of getting a loan until you repair your credit.
If you feel you might have problems in making timely repayments, it’s important to consider how a personal loan would fit into your budget. Making late payments will have you paying additional fees and can damage your credit.
What do I need to apply for a credit union personal loan?
To get a personal loan from a credit union, you first need to become a member. Each credit union has different stipulations for joining, this is called the field of membership. Eligibility can be determined by many factors – where you live, your employer, your family and any sort of activity within the community where the credit union operates. Once you’re a member, there will be certain requirements when applying for a personal loan, such as:
- Personal identification. Driver’s license, state identification card, Social Security card or passport.
- Personal details. Verification of address with either a copy of a lease or any recent utility or credit card bills. Also, proof of past or current income with W-2s, recent pay stubs or bank statements.
If you’re already a member of a credit union, than applying for a personal loan may be a good idea. If you’re looking into becoming a member, competitive loan interest rates may be the deciding factor.
However, you should still compare your other loan options. Credit unions may take longer to process your application, and you may not qualify for as much as you would with an online lender. Take your time, and remember: the best loan is the one that keeps your payments low while covering your financial needs.