If you need to borrow money to cover a car repair, home renovation, or another large expense, you may want to consider taking out a personal loan from a credit union.
Because credit unions are not-for-profit organizations, they may offer lower interest rates and fewer fees compared to banks, which can save you money over the life of your loan. Just keep in mind that you’ll likely have to be a credit union member to qualify and accept your loan funds.
- What are credit union personal loans?
- 6 credit union loans to consider
- How to qualify for a credit union loan
- How to get a loan from a credit union
- Pros, cons of these personal loans
- Online lenders vs. credit unions
What are credit union personal loans?
Credit union personal loans work the same way that personal loans from banks do. But credit union personal loan interest rates are often lower than rates offered by banks since their goal isn’t to make a profit.
You’ll typically need to be a member of a credit union to qualify for a loan, but if you have good credit, you’ll likely be able to lock in a competitive rate and favorable loan terms. Plus, the cost of credit union membership is typically low, though some credit unions restrict membership to certain communities or professions.
6 credit union loans to consider
If you’re thinking of getting a personal loan, consider these six credit unions. Note that PenFed is a Credible partner lender.
| Credit union | Loan terms | Loan amounts | Fees | Discounts | Minimum credit score |
|---|---|---|---|---|---|
| Alliant Credit Union | 1 to 5 years | $1,000 to $50,000 | No origination or prepayment fees | Check with lender | Check with lender |
| Boeing Employees’ Credit Union | Up to 6 years | Up to $30,000 | No origination fees | Check with lender | Check with lender |
| First Tech Federal Credit Union | 2 to 7 years | $500 to $50,000 | No application, origination, or prepayment fees | Check with lender | Check with lender |
| Navy Federal Credit Union | 3 to 5 years (up to 15 years for home improvement loans) | $250 to $50,000 | No origination or prepayment fees | APR discount worth 0.25 percentage points on select loans for active duty and retired military members | Check with lender |
| PenFed Credit Union | 1 to 5 years | $600 to $50,000 | None | Check with lender | 660 |
| Teachers Federal Credit Union | 2 to 5 years | Up to $50,000 | Check with lender | Check with lender | Check with lender |
How to qualify for a personal loan at a credit union
Requirements to qualify for a personal loan will vary from lender to lender. But there are some common requirements you’ll have to meet to get a personal loan from a credit union, including:
- Good to excellent credit: When you apply for a personal loan, the lender will perform a hard credit check to determine how likely you are to repay your loan. (Prioritize lenders that allow prequalification via a soft credit check to limit the impact to your credit report.) PenFed, for example, has a minimum credit score requirement of 660. You can get a personal loan via a more accessible lender even if you have fair or poor credit, but you’ll likely have to pay a higher interest rate.
- Low debt-to-income (DTI) ratio: Your DTI ratio gives lenders an idea of how much of your monthly income goes toward paying off existing debt and if you’ll be able to keep up with payments on any new debt. Aim to have a DTI no higher than 40% when taking out a personal loan.
- Solid employment and income: Some lenders will require a base level income or proof of employment when determining if you qualify to make sure you can afford to repay your loan.
- Meet credit union membership requirements: If you want to get a personal loan from a credit union, you’ll likely have to become a member before you apply. Many credit unions have lenient membership requirements, but others may only service consumers who fall into their field of membership. Common credit union fields of membership include working in a specific industry, being employed by a specific organization, and living or working in a specific community.
If you’re struggling to qualify for a personal loan, some credit unions will let you apply with a cosigner or co-borrower. Even if you don’t need a co-applicant to qualify, adding one to your loan can help you lock in a lower rate than you’d get on your own. Just be mindful that a cosigner or co-borrower would see their credit negatively impacted if you didn’t keep up with repayment.
How to get a personal loan from a credit union
If you’re ready to apply for a personal loan at a credit union, follow these four steps:
- Compare multiple credit unions. Shop around and compile a list of credit unions you’re eligible to join. Make sure to compare APRs, repayment terms, and fees the lender charges to find the right loan for your unique needs. Prioritize credit unions, like PenFed, that offer prequalification: the ability to check rates via a soft credit check.
- Apply for membership. If you aren’t already a member of the credit union you want to borrow from, you’ll likely need to apply for membership to be eligible for a personal loan. However, some credit unions, such as PenFed, roll the membership process into your loan application, so you might be able to hold off on joining until you have a better idea of whether your personal loan application will be approved.
- Submit the application. Many credit unions allow you to submit a personal loan application online, but you can also stop by a local branch to apply in-person. Come prepared with required documentation such as a government-issued ID and recent pay stubs or tax returns.
- Get your funds. Once your application is approved, you’ll sign a loan agreement so you can receive your money. Most credit unions are able to disburse loan funds within one to five days.
Pros and cons of credit union personal loans
As with any financial product, credit union personal loans have benefits and drawbacks:
Pros
- More favorable interest rates and loan terms. Because credit unions are not-for-profit institutions, they can offer better deals on lending products to their members.
- Wide variety of lending products. Credit unions exist to serve their members and they tend to offer a variety of personal loans that can help support their customers’ financial needs, such as payday alternative loans, alongside traditional personal loans.
- More personal service. Credit unions are typically community-focused financial institutions with a brick-and-mortar presence, so you may have an easier time getting assistance.
Cons
- Must be a member. Most credit unions only offer lending products like personal loans to their members, and it can be hard to qualify to be a member if you don’t meet the specifications required to join the credit union (such as having a specific type of job).
- Limited branch locations. If you want to apply for a personal loan in person, you’ll find that credit unions tend to have less in-person branches than major national banks do.
- Higher interest rates than online lenders. Because online lenders don’t have the overhead costs of maintaining a physical branch, they’re often able to use those savings to offer lower interest rates.
Personal loans from online lenders vs. credit unions
Credit unions aren’t your only option if you’re looking for a personal loan. Because online lenders don’t have to deal with the overhead costs of maintaining a physical branch, they can also lower interest rates and more favorable terms than traditional banks.
Let’s take a closer look at how personal loans from credit unions compare to similar products from online lenders.
| Time to fund | Availability | Discounts | Membership requirements | |
|---|---|---|---|---|
| Credit unions | One to five days | Often local, sometimes nationwide | Might offer autopay or membership discounts | Limited to members |
| Online lenders | As soon as the same or next business day | Generally nationwide | Might offer autopay or loyalty discounts | No membership requirement |
If you’re ready to get a personal loan, make sure to compare as many lenders as possible to find the loan that best suits your needs.