Key learning points
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Credit unions require membership to qualify.
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Interest rates are generally lower than the national average.
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Many credit unions have more lenient eligibility criteria than banks.
Unlike traditional banks, credit unions are not-for-profit organizations owned by their members. Because they tend to put the interests of their members first, they can offer personalized services. It is not unusual for cost savings to be passed on to account holders.
To illustrate, the national average rate for a personal loan is typically about half a percent lower if you borrow from a credit union. For a 36-month personal loan, credit unions had an average rate of 10.78 percent in December 2023, according to the National Credit Union Administration (NCUA). Banks charged a higher average rate of 11.37 percent in the same period. For these reasons, credit unions are worth considering if you’re looking for a personal loan.
How credit union personal loans work
Credit unions are functionally different from banks and online lenders. However, their personal loans are about standard. You borrow a fixed amount – usually €1,000 to €50,000 – for one to seven years.
Most personal loans are unsecured and your payments must be the same every month. Some credit unions even offer autopay discounts to lower your interest rate and help you save. You may also qualify for fair credit; Credit unions’ personal loan eligibility criteria are typically more flexible than those of banks.
Pros and cons of personal loans from credit unions
Plus points
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Credit unions typically have more flexible eligibility criteria than traditional banks.
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Origination fees are often limited or not charged.
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The average rates are more competitive than those of banks or online lenders.
Cons
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Financial products and services are only available to members.
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Loans above $30,000 are rare.
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Smaller credit unions may require an in-person application.
How to qualify for a personal loan from a credit union
Credit unions require membership to be applied for, although some credit unions allow you to apply for a loan and an account at the same time. In general, you will need to meet the same general criteria as with any other lender.
- Be a member of the credit union.
- Maintain an acceptable credit history, credit score and debt-to-income ratio.
- Provide proof of a steady income.
Some credit unions offer online prequalification that allows you to review the loan terms, rates and monthly payments you may qualify for. Furthermore, this will not affect your credit score as the prequalification process only requires a soft credit check.
You can also inquire directly with the lender about the eligibility criteria before applying. Doing this can save you time researching personal loan options.
How to get a personal loan from a credit union
Most credit unions offer modern, online applications, and many credit unions also allow you to apply at a branch. To get started, confirm your membership, prepare the required documents, and wait to be approved.
Step 1: Apply for membership
Once you have identified your options and created a short list of top credit unions, you can apply for membership. You will need to provide some basic information, such as your name, Social Security number, and a copy of your government-issued ID. Most credit unions also perform a soft credit check when reviewing your membership application.
Step 2: Submit a personal loan application
The credit union will typically request the same personal information and documents that you provided when applying for membership, along with information about your employer and income. In most cases, the actual application takes no more than 15 minutes.
Step 3: Receive the proceeds of your loan
Most lenders issue decisions relatively quickly, sometimes within a few hours. If your application is approved, the credit union’s underwriter will ask you for any additional documents and finalize your closing documents. Once you complete your application and it is approved, you should receive the money within a few business days.
Credit unions that offer personal loans
With more than 5,200 credit unions There is no shortage of lending options in the US. However, you should carefully assess your local and national options. Not all credit unions are comparable, so consider the ones that offer the most competitive terms.
Some major credit unions, such as PenFed and Alliant, offer online applications to a wide variety of borrowers.
| Lender | prices | Loan terms | Loan amounts | Minimum credit score requirement |
|---|---|---|---|---|
| Pen Fed | 7.99%-17.99% | Up to 60 months | Up to $50,000 | 700 |
| Alliance | From 11.79% | Up to 60 months | Up to $100,000 | Not specified |
Pen Fed
Learn more
in our bank interest overview
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Founded in 1935, PenFed Credit Union is a well-known institution that offers personal loans. If you have excellent credit, you may qualify for a very competitive interest rate, making borrowing more affordable. And PenFed allows co-borrowers – something not offered by many other major lenders.
There are no origination fees and most loans are funded within one to two business days of approval. You get a loan term of up to 60 months and PenFed does not charge a prepayment penalty if you decide to pay off the loan early.
Alliance
Learn more
in our bank interest overview
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Also founded in 1935, Alliant is a national credit union that offers some of the largest personal loans – up to $100,000. To qualify, you must meet membership requirements and have had an account for at least 90 days.
It doesn’t allow co-borrowers, but there are also no origination fees. And unlike many other lenders, you can only borrow €1,000. However, it’s best to only consider Alliant if you plan to bank with Alliant. Otherwise, you’ll have to wait for your account to be created, followed by a hard credit check, as Alliant doesn’t offer prequalification.
Credit unions versus banks and online lenders
If you’re unsure between applying for a personal loan through a credit union, bank or online lender, consider these important differences:
- Accessibility: Personal loans from banks and online lenders are generally available to both current and potential customers, often without the need for prior membership.
- Eligibility Guidelines: Banks prefer applicants with good or excellent credit, but online lenders are often more lenient and grant loans to borrowers with lower scores. Like credit unions, banks can give you loans if your history as a member is positive. Online lenders typically focus on your credit and debt-to-income ratio to decide if you’re a good fit.
- Registration procedure: Some banks allow you to apply online, but you may need to visit a physical branch or call a banker to get started. However, online lenders use a completely digital application process.
- Loan amounts and rates: These figures depend on the lender, but credit unions generally offer more competitive interest rates than banks and online lenders.
- Customer service: You can meet with a personal banker from a bank or credit union to discuss your personal loan and ask any questions you may have. Support may be limited to email, phone and chat with online lenders.
In short
Credit unions are a viable option when considering a personal loan. They offer personalized service and competitive rates, and you can trust that you are dealing with a financial entity that puts its members first. Still, there are a few drawbacks to consider when evaluating your options.
Ultimately, it’s best to get interest rate quotes from at least three lenders to ensure you get an exceptional deal on a personal loan.
