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If you need to borrow money for a personal expense, a personal loan from a credit union may be a good choice.
Because credit unions are non-profit organizations, they sometimes offer lower interest rates than banks, which could save you money over the life of your loan.
Here’s what you need to know about getting a personal loan from a credit union:
6 credit union loans to consider
Unlike banks and online lenders, credit unions tend to be smaller, local organizations.
This means that it’s usually a good idea to start your search for a credit union in your own geographic area – although there are also nationwide credit unions that you might qualify with as well.
Here are six credit unions that offer personal loans. Note that PenFed is a credible partner while the other listed credit unions are not.
How to get a personal loan for a credit union
Getting a personal loan from a credit union is a little different from other types of lenders, mainly because you will need to become a member of the credit union to potentially qualify for a loan.
If you’re ready to get a personal loan from a credit union, follow these four steps:
- Shop around and compare credit unions. Be sure to research the credit unions you qualify for. After you’ve compiled an important list, compare the interest rates, repayment terms, and fees charged by credit unions to find the loan that’s right for you.
- Choose your loan option. After you’ve compared credit unions, choose the loan option that best suits your needs.
- Complete the request. When you are ready to apply, you will need to complete a full application and submit all required documents, such as tax returns or pay stubs.
- Get your loan funds. If you are approved, the credit union will sign you for the loan so they can send you the funds. The financing time for credit union loans is typically one to seven business days, depending on the lender.
It is also important to also consider how much the loan will cost you over time. You can estimate how much you will pay for a loan using our personal loan calculator below.
Enter your loan information to calculate how much you could pay
loan, you will pay
monthly and a total of
interest over the life of your loan. You will pay a total of
over the life of the loan.
How to qualify for a personal loan from a credit union
All personal lenders have their own requirements to qualify for a loan. However, there are some common criteria that you are likely to meet if you are looking for a credit union personal loan. For example, you will typically need:
- Good to excellent credit (usually a score of 700 or more)
- Low debt ratio
- Stable income and work history
- Eligibility to become a member of the credit union
Learn more: Where to get a personal loan
Pros and Cons of Loans to Credit Unions
Here are some pros and cons to consider before taking out a cash loan.
- Lower rates: In December 2020, the average interest rate on a personal loan from a credit union was 9.09% compared to the average of 10.24% for bank loans.
- Community driven: Credit unions are non-profit organizations that serve specific areas of a community. For this reason, you might find a better customer experience and higher quality products at a credit union as opposed to a bank or online lender.
- Must become a member: Credit unions are required by law to restrict their membership to specific categories – this is called an area of ââmembership. In many cases, the scope of membership of a credit union extends to people who live in a certain area, work in a specified career, or join an associated nonprofit group. To take out a loan from a credit union, you must be eligible for membership.
- Limited availability: Since credit unions have membership criteria, they are not always available nationally. While some are available nationwide, many are small, local financial institutions that you may not be eligible for.
To verify: Debt Consolidation Loans
Alternatives to a payday loan
Some credit unions offer Alternative Payday Loans (ALP), which are usually small, short-term loans designed to get you on your next paycheck.
However, although PALs serve a similar purpose to payday loans, they are much more affordable and do not involve predatory lending practices.
Typically, PALs range from $ 200 to $ 2,000 with terms of one to 12 months, depending on the credit union. Keep in mind that in some cases you will also need to have been a member of the credit union for a period of time before you can apply for a PAL.
Here’s how a PAL compares to a typical payday loan:
|Alternative Payday Loan (PAL)||Payday loan|
|Average interest rate||Up to 28% APR||300% to 500% APR
(may be higher depending on the lender)
|Amount of the loan||$ 200 to $ 2,000
(depending on the type of loan)
|Usually $ 50 to $ 1,000|
|Min. credit rating||Depends on the credit union||N / A|
|It’s time to fund||Depends on the credit union||Same day|
Learn more: Credit Card Consolidation Loans
Credit unions vs online lenders
If you are looking for a personal loan, it is important to compare not only credit unions but also other types of lenders, including online lenders.
Here are several important points to keep in mind when considering personal loans from credit unions versus online lenders:
|Credit unions||Online lenders|
|It’s time to fund||From the same day
(depending on the lender)
|From the same day
(depending on the lender)
|Where to find them||Often local but sometimes available nationwide||Usually nationwide|
|Discounts||Could offer automatic payment discounts||Could offer auto-pay or loyalty discounts|
|Membership||Must be a member of the credit union to apply
Eligibility can be based on:
|No membership condition|
If you do decide to get a personal loan, be sure to compare as many lenders as possible to find a loan that meets your needs. Credible makes it easy for you – you can compare your prequalified rates from our partner lenders below in two minutes.