These nonprofit lenders often offer competitive rates — but you’ll have to join to qualify.
However, it can take longer to get your funds. And loans are only available to members.
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.
Compare personal loans from some of the largest credit unions
|Credit union||Eligibility||APR||Max loan amount||Other loan types offered|
|Navy Federal Credit Union||Must be affiliated or have family affiliated with the Armed Forces, Department of Defense Coast Guard or National Guard.||8.19% to 18.00%||$50,000|
|PenFed Credit Union||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.||6.49%–20%||$25,000|
|Alliant Credit Union||Must work for, be a member or donate to an Alliance partner or charity.||6.49% to 10.49%||$50,000|
|Consumers Credit Union||Must open a share savnings account with a valid ID. Noncitizens welcome.||11.99% (starting at)||$40,000|
|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|
|Teachers Federal Credit Union||Must show proof of residency in Nassau County or Suffolk County in New York.||As low as 10.45||$20,000|
|State Employees Federal Credit Union||Must show proof of residency in select areas of New York||5.24%||$30,000|
What sets personal loans from a 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.
How can credit unions offer low rates?
Credit unions can offer low rates because of the way they’re structured.
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.
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. With an unsecured loan 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 acts 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 (PALS). Available at some federal credit unions, PALS are short-term loans $200 to $1,000 with interest rates capped at 28%.
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 unsecured 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, 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.