Getting a Personal Loan From a Credit Union: What to Know
If you’re in the market for a personal loan to pay for home improvements, a big vacation or debt consolidation, you have options. Traditional banks, online lenders and credit unions offer personal loans, but you’ll find different rates, requirements and experiences at each.
Credit unions are a bit different from other lenders. They require membership and may be federally chartered — these have “federal” in their names. Others are chartered and supervised by state regulators. While credit unions are smaller and perhaps have less name recognition than some traditional financial institutions, there are advantages to becoming a member and using their products.
5 things to know about credit union personal loans
Before you sign on the dotted line, there are a few things to keep in mind as you shop personal loans:
1. You need to be a member
Unlike traditional banks, which are for-profit organizations run by shareholders, credit unions are nonprofits owned by their members. This means that to be eligible for a personal loan or other financial products, you must join the credit union.
Some credit unions require you to work for a specific employer — Disney employees can join Partners Federal Credit Union, for example — while others, like Navy Federal Credit Union, are dedicated to people who work in a particular field. In other cases, membership is based on geographic location or family relationships. You may also have to pay a small fee ($5 to $25) to join.
2. Credit unions are community-oriented
While there are some credit unions you can join no matter where you live, others serve only small geographic regions. In some cases, this means your credit union will provide additional services in your community, such as financial education and support for small businesses.
But if your credit union is local, you may not have easy access to a branch if you move to another state or a different part of the country.
3. Your loan process may be less sophisticated
Credit unions may not have the most up-to-date websites. If online banking and digital access are important to you, keep this in mind before you choose to work with a credit union. It may also take a little bit longer to get your loan processed and paid out at a credit union than at a bigger financial institution.
4. Loan requirements may be easier to meet
Credit unions still have requirements that borrowers must meet to be eligible for personal loans, but they’re generally less strict than other lenders. The minimum credit score for a personal loan at a credit union could be as low as 525.
If you have a lower score or a poor credit history, a credit union may still approve your loan, while other banks or online lenders might not. You will have to fill out an application and provide information about your credit, income and debts.
If you’re not sure of your credit score, you could check it for free using My LendingTree.
5. You may find lower rates
One advantage of a member-owned credit union is access to loans with lower rates and minimal fees. It generally costs less to borrow from a credit union than from a traditional bank.
While none of the credit unions on MagnifyMoney’s personal loan marketplace have the lowest interest rates available, they also don’t have the highest. For example, some online lenders have APRs as low as 3.49%. (Note that MagnifyMoney is a subsidiary of LendingTree.)
4 personal loans from credit unions
Before you choose a lender, it’s important to compare rates to make sure you get the best deal.
“The rates are the rates are the rates,” Dennis Nolte, a certified financial planner and vice president at Seacoast Investment Services in Winter Park, Fla., told LendingTree. “Whoever is going to give you the best rates with the best terms with the best turnaround time is where you go.”
LendingTree offers a personal loan tool that helps match you with lenders. You’ll input information about yourself and what you need out of a loan before reviewing loan offers. Note: By using LendingTree to compare loan offers, you may or may not be matched with any lender mentioned in this article. Based on your creditworthiness, you may be matched with up to five different lenders in our partner network.
|Name||APR Range||Terms||Borrowing Limits||Min. credit requirements|
|PenFed Credit Union||Starting at 6.49%||6 to 60 months||Up to $20,000||Not specified|
|Apple Federal Credit Union||9.24%–17.24%||12 to 60 months||Up to $50,000||580|
|SAFE Credit Union||9.49%–14.99%||Up to 60 months||Up to $10,000||600|
|Affinity Federal Credit Union||9.75%–0.00%||Up to 60 months||Up to $15,000||525|
PenFed Credit Union
PenFed Credit Union offers personal loans from $500 to $20,000, which you can use for any purpose from home renovations to debt consolidation. You do have to join PenFed Credit Union to access its services, but membership is open to military members and government workers, certain employee groups and association members, relatives of current members and others.
Personal loan terms range from three years to five years, so you can find a monthly payment that works for your budget. You won’t get hit with any origination fees or prepayment penalties on your personal loan.
PenFed Credit Union has some of the lowest APRs available for personal loans, starting at 6.49%. But these rates are likely reserved for those with the highest scores.
Apple Federal Credit Union
Apple Federal Credit Union provides personal loans up to $50,000 in a lump sum with flexible terms ranging from one year to five years and low fixed APRs (9.24% to 17.24%).
Apple Federal Credit Union loans are a good option for those who have lower credit scores and are looking to rebuild their credit. You may qualify with a score of 580. Plus, its Skip-a-Payment option allows you to skip a monthly payment once a year if money gets tight. Keep in mind there is a $25 fee to do so.
Apple Federal Credit Union is based in northern Virginia, so you can qualify for membership if you live, work, worship, volunteer or study in the area. The credit union also accepts members based on schools, family and household ties, association memberships and employer affiliations.
To apply for a personal loan with Apple Federal Credit Union, you’ll need a government-issued identification and income information, such as a recent pay stub and W-2. Even though brick-and-mortar branches are in Virginia, you have the option to e-sign loan documents and process your paperwork by mail.
SAFE Credit Union
SAFE Credit Union’s personal loans and other products are available to those who live in certain counties in California, work for specific organizations or are related to current members.
For general personal loans, SAFE Credit Union has loans up to $10,000, with APRs ranging from 9.49% to 14.99% and terms up to 60 months. This takes into account a 0.25% relationship discount. SAFE Credit Union requires a minimum 600 credit score.
If you’re making green energy improvements to your home, you may be eligible for a longer loan term or lower APRs. Check with SAFE Credit Union to learn more.
Affinity Federal Credit Union
Personal loans from Affinity Federal Credit Union are easily accessible to those with less-than-stellar credit histories: You only need a credit score of 525 to qualify. Affinity Federal Credit Union’s loans max out at $15,000 with flexible terms up to five years, so they’re good for borrowers who need a smaller amount of cash and can be used for almost any purpose.
APRs on personal loans from Affinity Federal Credit Union start at 9.75% and go up to 0.00%. You won’t get hit with any origination fees or prepayment penalties if you can pay back your loan before your term ends. You’ll also get a 0.25% reduction in your rate if you set up automatic payments on your loan.
The credit union does require membership to access its products and services, but it has a long list of employers, clubs and associations that qualify. If you don’t belong to any of those, you can join the New Jersey Coalition for Financial Education or Connecticut Jump$tart Coalition with a $5 donation.
The bottom line
Credit unions offer flexible personal loans to those who may not be able to qualify to borrow from other lenders. If you are eligible to become a member of a local or federal credit union — or have the option to join for a small fee — the low rates may be your best option.