Key takeaways

  • Credit unions require membership to qualify.
  • Interest rates tend to be lower than the national average.
  • Many credit unions have more lenient eligibility criteria than banks.

Unlike traditional banks, credit unions are member-owned and not-for-profit organizations. Because they tend to put the interests of their members at the forefront, they can offer personalized services. It’s not uncommon for cost savings to be passed on to account holders.

To illustrate, the national average rate for a personal loan tends to be about half a percent lower when 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 that same period. For these reasons, credit unions are worth considering if you’re in the market for a personal loan.

How credit union personal loans work

Credit unions are functionally different from banks and online lenders. Their personal loans, however, are about standard. You borrow a set amount — usually $1,000 to $50,000 — for one to seven years.

Most personal loans are unsecured, and your payments should be the same each month. Some credit unions may even offer autopay discounts to help reduce your interest rate and help you save. You may also qualify with fair credit — credit union personal loan eligibility criteria tends to be more flexible than that of banks.

Pros and cons of credit union personal loans

Pros

  • Credit unions tend to have more flexible eligibility criteria than traditional banks.
  • Origination fees are often limited or not charged.
  • Average rates are more competitive than banks or online lenders.

Cons

  • Financial products and services are only available to members.
  • Loans above $30,000 are rare.
  • Smaller credit unions may require an in-person application.

How to qualify for a credit union personal loan

Credit unions require membership to apply, though some may allow you to apply for a loan and an account at the same time. Overall, you will need to meet the same general criteria as with any other lender.

  • Be a member of the credit union.
  • Have an acceptable credit history, credit score and debt-to-income ratio.
  • Provide proof of steady income.

Some credit unions offer online prequalification that let you view loan terms, rates and monthly payments you may qualify for. Plus, there’s no impact on your credit score since the prequalification process only requires a soft credit check.

You can also inquire about eligibility criteria directly with the lender before applying. Doing so can save you time when researching personal loan options.

How to get a credit union personal loan

Most credit unions offer modern, online applications, and many also allow you to apply at a branch. To get started, confirm your membership, prepare required documents and wait to see if you are approved.

Step 1: Apply for membership

Once you identify your options and create a short list of top credit unions, apply for membership. You will need to provide some standard information, like 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 you provided when applying for membership, along with information about your employer and income. In most cases, the actual application will take no more than 15 minutes.

Step 3: Receive your loan proceeds

Most lenders issue decisions relatively quickly, sometimes within a few hours. If your application is approved, the credit union’s underwriter will request any additional documents they need from you and finalize your closing documents. Once you complete your application and are approved, you can receive funds in just a few business days.

Credit unions offering personal loans

With over 5,200 credit unions in the U.S., there is no shortage of loan options. However, you should carefully review your local and national options. Not all credit unions are similar, so consider the ones that offer the most competitive terms.

Some large credit unions, like PenFed and Alliant, offer online applications to a wide variety of borrowers.

Lender Rates Loan terms Loan amounts Minimum credit score requirement
PenFed 7.99%-17.99% Up to 60 months Up to $50,000 700
Alliant From 11.79% Up to 60 months Up to $100,000 Not specified
PenFed

PenFed

Rating: 4.7 stars out of 5
4.7
Learn morein our Bankrate review
Alliant Credit Union logo

Alliant

Rating: 4.5 stars out of 5
4.5
Learn morein our Bankrate review

Credit unions vs. banks and online lenders

If you’re torn between applying for a personal loan through a credit union, bank or online lender, consider these key differences:

  • Accessibility: Personal loans with banks and online lenders are generally available to both current and prospective customers, often with no need for previous membership.
  • Eligibility guidelines: Banks prefer applicants with good or excellent credit, but online lenders are often more lenient and extend loans to borrowers with lower scores. Like credit unions, banks may lend to you if your history as a member is positive. Online lenders typically focus on your creditworthiness and debt-to-income ratio to decide if you’re a good fit.
  • Application process: Some banks let you apply online, but you may be required to visit a physical branch or call a banker to get started. However, online lenders feature 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 support: You can meet with a personal banker at a bank or credit union to discuss your personal loan and present any questions you may have. Support is potentially limited to email, phone and chat with online lenders.

Bottom line

Credit unions are a viable option when considering a personal loan. They offer personalized service and competitive rates, and you can have peace of mind that you’re dealing with a financial entity that puts its members first. Still, there are a few drawbacks to consider when evaluating your options.

Ultimately, getting rate quotes from at least three lenders is best to ensure you’re getting an exceptional deal on a personal loan.