Credit union personal loans

Apply for a personal loan through a credit union for competitive interest rates.

You may need extra money for consolidating your debt, going on holiday, repairing your home or relocating. You could take out a personal loan to cover all of these costs. These loans are usually unsecured, but some lenders provide secured personal loans.

You can get a personal loan from a traditional bank, online lender, peer-to-peer lender or a credit union. Choosing a credit union may save you money. This guide will tell you how.

What is a credit union?

Credit unions are financial nonprofit organisations that allow members to save and borrow money. They offer the same products as traditional banks but are owned by all of its members and not just a small group of owners. All members typically share something in common that benefits their community, and they usually take a democratic approach.

Credit unions first appeared in the UK in the 1960s and since then, appear to be growing in popularity.

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 organisation or paid out to members in the form of small dividends, lower interest rates or typically better terms for financial products. There are no external shareholders to pay.

What sets credit union personal loans apart?

The main difference between a credit union and most other kinds of lending institutions is that credit unions 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.

Some credit unions loans will cost you 1% a month on the reducing balance of the loan (an annual percentage rate (APR) of 12.7%). For example, if you decide to borrow £1,000 over a one year period, your repayment would be no more than £1,067 in total.

By law, the amount of interest charged by a credit union can be no more than 3% a month on the reducing balance of a loan (APR of 42.6%).

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 savings accounts, cash ISAs and loans. Both typically have more involved applications than online lenders and could take at least a couple of weeks to process.

One key difference between credit unions and banks is that 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 for loans 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 UK 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 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

Table: sorted by representative APR, promoted deals first
1 - 6 of 6
Name Product Total Payable Monthly Repayment Representative APR Link
HSBC Existing Customer Personal Loan
Check eligibility
View details
Representative example: Borrow £10,000.00 over 3 years at a rate of 3.3% p.a. (fixed). Representative APR 3.3% and total payable £10,509.12 in monthly repayments of £291.92.
Novuna Personal Loan
View details
Representative example: Borrow £10,000.00 over 3 years at a rate of 3.1% p.a. (fixed). Representative APR 3.1% and total payable £10,478.16 in monthly repayments of £291.06.
Lending Works Personal Loan
Check eligibility
View details
Representative example: Borrow £10,000.00 over 3 years at a rate of 12.0% p.a. (fixed) with an application fee of £0.00. Representative APR 12.5% and total payable £11,928.96 in monthly repayments of £331.36.
Barclays Bank Existing Current Account Customer Barclayloan
View details
Representative example: Borrow £10,000.00 over 3 years at a rate of 7.9% p.a. (fixed). Representative APR 7.9% and total payable £11,219.04 in monthly repayments of £311.64.
Lloyds Bank Existing Customer Personal Loan
View details
Representative example: Borrow £10,000.00 over 3 years at a rate of 4.4% p.a. (fixed). Representative APR 4.4% and total payable £10,678.68 in monthly repayments of £296.63.
My Community Bank Personal Loan
Check eligibility
View details
Representative example: Borrow £6,000.00 over 4 years at a rate of 18.85% p.a. (fixed). Representative APR 18.85% and total payable £8,335.00 in monthly repayments of £173.64.
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Compare up to 4 providers

Please note: You should always refer to your loan agreement for exact repayment amounts as they may vary from our results.
Late repayments can cause you serious money problems. See our debt help guides.

Pros and cons of credit union personal loans

  • Competitive rates. Since credit unions don’t operate with the motive of generating profits, they’re often able to offer competitive interest rates. Credit unions have also been known to 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.
  • Nonprofit. Credit unions are not-for-profit institutions. Unlike banks, any earnings a credit union makes 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 could 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 savings account if you move — which you’re sometimes 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. 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 licence or passport.
  • Personal details. Verification of address with either a copy of a tenancy agreement or any recent utility or credit card bills. Also, proof of past or current income with P60s, recent pay slips or bank statements.

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