Why a Credit Union Could Be Your Best Personal Loan Option

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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Personal loans are popular borrowing tools because they’re versatile and relatively inexpensive. You can use the funds for just about anything you want, and you usually can find lower interest rates than you’d get with a credit card or payday loan.

However, shopping for a personal loan can be overwhelming. There are thousands of banks, credit unions, and online lenders that offer them. But credit unions tend to provide some of the best personal loans on the market. Why?

  • They’re not-for-profit organizations.
  • They offer some of the most affordable personal loan interest rates.
  • They provide both secured and unsecured loans with flexible terms.

These are just some of the benefits of credit union personal loans. So, if you want the best deal, it might be as easy as walking to your local credit union and applying for a loan.

Why you should consider a credit union personal loan

Credit unions and banks offer many of the same products, but there are some key differences in how they operate that may make a credit union a better choice in many cases.

Credit unions are not-for-profit organizations

Because credit unions don’t exist to maximize profits or appease stockholders, they’re more focused on the needs of their members than banks are.

All earnings are paid back to the members in the form of higher savings interest rates and lower loan interest rates.

Credit unions are community-oriented

Unlike big banks, credit unions are usually localized to a specific state or region.

While some credit unions don’t restrict their membership to a geographical area, they still strive to focus on a specific community.

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For example, PenFed Credit Union tailors many of its products and services to the military community. That said, it does accept folks with no military connection as members.

Credit unions cooperate with each other

Many credit unions work with each other and share resources to offer better services to their members. If you choose to bank with the credit union that services your personal loan, some services are more convenient.

For example, the CO-OP ATM Network has almost 30,000 ATMs offering surcharge-free withdrawals for members at almost 2,000 credit unions.

Credit unions also often share technology to help provide better services for their customers.

Types of credit union personal loans

Because credit unions focus more on their members’ needs than profits, you may find better personal loan options than what a bank offers.

Unsecured personal loans

With an unsecured loan, you don’t need to put up any collateral. Both banks and credit unions offer unsecured personal loans, but you may get better a better interest rate through a credit union.

To get the best interest rate on an unsecured personal loan, you’ll generally need to have good credit and stable income.

Secured personal loans

Not many banks offer this type of loan, but credit unions often do.

With a secured loan, you’ll generally have to make a deposit into a savings or a certificate of deposit account as collateral. The cash deposit is usually 100 percent of the loan amount, but it may be less depending on the credit union and loan type.

If you end up defaulting on the loan, the credit union can use the deposit to cover its losses.

Secured personal loans often have lower interest rates because of the collateral effect. They’re also more accessible to people with less-than-stellar credit. In some cases, you’ll even earn interest on your deposit.

Payday alternative loans

If you need short-term cash, the first thing to come to mind may be a payday loan. The problem is that payday loans typically charge a 400.00% APR or higher, according to the Consumer Federation of America.

The National Credit Union Administration understands the need to help consumers avoid predatory payday lenders. It allows federal credit unions to offer short-term, small-dollar loans as an alternative.

Conditions for payday alternative loans include:

  • Loans balances can be for $200 to $1,000.
  • It must be repaid within one to six months; no rollovers allowed.
  • The borrower must be a member of the credit union for at least one month.
  • The credit union cannot charge more than $20 for the application fee.
  • The maximum APR is 28.00%.

Choosing a credit union

For many people, being able to walk into a branch to get help is a top priority. If this is you, do a quick internet search for credit unions near you. With thousands of credit unions across the country, there should be plenty of options in your area.

If you don’t want your credit union to be restricted by location, many large credit unions have a wider geographical footprint. Eligibility requirements usually include where you live, who your employer is, and whether you belong to a participating organization.

Being related to a current member is also a plus in most cases. And if you don’t belong to a participating organization, you can often join one by making a donation.

Here are five credit unions that you can join without living near a branch:

  1. PenFed Credit Union
  2. Digital Federal Credit Union
  3. Alliant Credit Union
  4. Lake Michigan Credit Union
  5. NASA Federal Credit Union

It’s also important to make a distinction between federally and state-chartered credit unions. While they’re similar in terms of their functions and requirements, they differ when it comes to their legal regulations. A state-chartered credit union must follow its respective state’s laws regarding financial services. But the rules for a federally chartered credit union are determined by the National Credit Union Administration.

What does this mean for you? Well, there are some minor differences to consider:

  • Federal credit unions have maximum interest rate regulations, while the interest rate regulations for state-chartered credit unions vary, meaning they could have higher or no limits.
  • Some state-chartered credit unions have deposit insurance backed by the U.S. government.
  • Federal credit unions are insured by the National Credit Union Share Insurance Fund, which is backed by the government.

Ultimately, these factors should have a minimal effect on your loan. But you could ask the credit union how this distinction might alter your loan (if at all).

How to get a credit union personal loan

If you’re interested in getting a personal loan from a credit union, you may need to take some extra steps to qualify. Here are some typical credit union personal loan requirements:

  • Find a credit union and join it as a member. Each credit union should have a page showing eligibility requirements to become a member. They are often location-specific, so you may not be eligible for some.
  • Fill out an application with your personal information and indicate whether you’re applying alone, with a joint applicant, or with a co-signer.
  • Choose your terms: fixed or variable interest rate, repayment period, and loan amount.
  • Declare what you plan to do with the funds.

In most cases, you can apply online. But you can also usually apply at your local branch or by phone.

Credit unions vs. online lenders

It’s important to shop around when you’re looking to borrow a personal loan. And in your search, you might come across some online lenders. How do they compare to credit unions? Consider these details before making a decision:

  • Like credit unions, online lenders might be more willing to loan you money if you have poor credit. But their interest rates could be higher since they don’t know you personally and are looking only at your financial data.
  • Many online personal loan lenders will run a soft credit check to reveal your loan options, whereas a credit union might run a hard credit check, causing a temporary dip in your credit score.
  • With online lenders, you can apply and access your loan information from the comfort of your home. Credit unions do have an online presence, but it might not be as robust or high-tech as a web-based company’s.

Why you should opt for a credit union personal loan

Getting a personal loan from a credit union is often a great way to qualify for lower interest rates and better service.

Even though most credit unions serve a small community, they usually offer just as many products and services as big banks. And because of their not-for-profit status, you can rest assured that your needs are your credit union’s top priority.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 6.58% APR to 14.87% APR (with AutoPay). Variable rates from 6.275% APR to 12.575% APR (with AutoPay). SoFi rate ranges are current as of July 16, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.275% APR assumes current 1-month LIBOR rate of 2.10% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  1. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  2. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  1. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  2. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.73% – 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
6.28% – 14.87%1$5,000 - $100,000
Check rate nowon SLH's secure site
6.87% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
4.99% – 29.99%$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%2$5,000 - $50,000Visit Citizens
15.49% – 34.49%$2,000 - $25,000Visit LendingPoint
5.99% – 35.89%$1,000 - $40,000Visit LendingClub
5.49% – 18.24%$5,000 - $75,000Visit Earnest
9.95% – 35.99%$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.