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.
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:
- PenFed Credit Union
- Digital Federal Credit Union
- Alliant Credit Union
- Lake Michigan Credit Union
- 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!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|7.73% – 29.99%||$1,000 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|