Apply for a personal loan through a credit union for competitive interest rates
You may need extra money for consolidating your debt, going on a vacation, repairing your home or relocating. You can take out a personal loan to cover all of these costs. These loans are usually unsecured, but some lenders provide deposit-secured personal loans.
You can get a personal loan from a traditional bank, online lender, peer-to-peer lender or a credit union. Choosing credit union may save you money. This guide will tell you how.
What is a credit union?
Credit unions are financial institutions that offer the same products as traditional banks, but differ in the sense that they are nonprofit organizations owned by all of its members and not just a small group of owners. Credit unions have a strong focus on their community of members and use a democratic approach.
Members get to elect a board of directors who provide general oversight of keeping the best interest for the credit union’s members. Because credit unions are nonprofit, the earnings are put back into the members pockets in the form of lower interest rates, reduced fees and typically better terms for their offered financial products.
Compare personal loans from some of the largest credit unions
Use this table to compare loan amounts, interest rates and eligibility requirements of top 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 credit union personal loans apart?
The main difference between a credit union and most other kinds of lending institutions is that a credit union are nonprofits. That means their end game isn’t making profits for its shareholders, but providing its members with more competitive services.
Before you get a personal loan from a credit union you’ll have to become a member. Some credit unions offer membership to limited groups of people, so be sure to check if you qualify.
Credit unions vs. banks
Credit unions are a lot 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 loans. Both typically are more involved applications than online lenders and can take at least a couple weeks to process.
One key difference between credit unions and banks is credit unions tend to have less strict eligibility requirements, especially compared to international brands. They can also have more information available online, often providing tables, calculators and other tools allowing you to calculate your potential monthly repayments before you apply.
Credit unions vs. online lenders
Credit unions and online lenders typically have more flexible requirements than banks. Both are also typically more friendly to online customers.
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. Credit unions often offer more competitive rates, however.
How do I compare personal loans from credit unions?
Many credit unions across the US provide personal loans to their members. These loans can vary across different parameters, such as:
- Interest rates. Your credit score has an effect on the annual percentage rate (APR) you’ll pay on the money you borrow. This rate will vary at across lenders. The APR has a major effect how much you end up repaying, especially if you borrow a significant amount.
- Fees. Credit Unions tend to keep their fees to a minimum. However, this does not mean that they don’t charge any fees. Take time to review how much you’ll have to pay if you make late payments or if payments fail to go through because of insufficient funds in your account.
- Loan amount and term. The minimum and maximum amount you can borrow can vary from one credit union to the next. This also holds true when it comes to the loan term.
- Extra repayments. By making extra repayments or repaying your loan early you can save on interest charges. In some cases you may have to pay additional fees or penalties, so be sure to check with your lender before making extra payments.
Want a loan from an online provider instead? Compare these top options
Pros and cons of credit union personal loans
- Competitive rates. Since credit unions don’t operate with the motive of generating profits, they’re able offer competitive interest rates. Credit unions also charge lower fees in comparison to conventional banks.
- Use funds for any purpose. What you do with the funds you get through a credit union personal loan is basically up to you, provided you use the money for legitimate purposes.
- Bad credit loans. Some credit loans offer personal loans to individuals with poor credit. Applying for such loans may require that you apply with a qualified co-borrower or that you to provide some kind of collateral.
- Nonprofit. Credit unions are not-for-profit institutions. 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.
- Membership. Applying for a personal loan through a credit union requires that you start by becoming a member. You may have to pay a nominal minimum deposit along with a membership fee.
- Less choice. You have less choice if you limit your selection to only personal loans from credit unions.
- Slow turnaround. It can take a couple weeks to get your funds — or even longer.
- Limited services. Many local credit unions only have a handful of ATMs and locations. While this might not affect your loan necessarily, you could have trouble accessing your checking or savings account if you move — which you’re required to open to become a member.
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.