Should I Get Personal Loan from a Credit Union or a Bank?
JB
Last updated 03/26/2024 by
Julie Bawden-DavisIf you’re looking for some quick cash at a great rate, a credit union personal loan may be an ideal option. Credit union personal loans generally offer low interest rates, even for borrowers with less than perfect credit.
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How credit unions work
Credit unions are nonprofit financial institutions owned and controlled by members. They are designed to serve those members, rather than to make a profit. According to MyCreditUnion.gov, there are more than 98 million credit union members throughout the U.S., and membership continues to climb.
Because credit unions are designed to serve members rather than rack in the profits like banks, they tend to offer lower interest rates on loans, as well as lower fees and higher savings rates. Eligibility for membership can depend on a variety of criteria, including where you work, go to school, live or worship. There are also credit unions dedicated to members of the military and various associations.
Credit union personal loan benefits
Interest rates are lower at credit unions than banks. According to the National Credit Union Association, in September 2016, an unsecured 36-month fixed rate loan averaged at 9.22 percent interest, while the same loan averaged at 10.12 percent interest at banks. The differences were even starker for used car loans that month. A 48-month loan at a credit union was 2.79 percent interest, while the same loan was 5.06 percent interest at a bank.
In September 2016, an unsecured 36-month fixed rate loan averaged at 9.22 percent interest, while the same loan averaged at 10.12 percent interest at banks.
Credit unions are also less demanding when it comes to credit history. Some credit unions even offer credit to individuals with a poor credit history and low score. And they’ll work with you if you have a bankruptcy on your record or are self-employed.
To make the borrowing experience easier, credit unions are also well-known for having superior customer service compared to banks. A welcoming attitude and speedy service is especially appreciated when you’re stressed about obtaining funding.
Credit union personal loans drawbacks
Credit unions do have drawbacks. Before applying, consider the potential negatives of getting a personal credit union loan by answering the following questions.
- Can you become a member?
The Federal Credit Union Act of 1934 requires that credit unions have criteria for membership. For this reason, most credit unions are affiliated with an industry, religion, fraternal organization or region. You may not qualify to join if you don’t meet the specified criteria. (You may be able to join through a qualifying family member.)
- Is the credit union conveniently located?
Many credit unions have fewer physical locations than banks. Not all credit unions offer ATMs, although many credit unions belong to co-op ATM networks. Limited access to ATMs can make withdrawing money and making deposits a hassle.
- Does the credit union offer enough digital services?
Not all credit unions have caught up with technology and offer mobile banking and online services like banks do. This is especially an issue if the credit union’s physical location and ATMs aren’t conveniently located. It is also a problem if you can’t make loan payments online.
- How quickly will the credit union fund your loan?
Loan officers usually review credit union loan applications. That means that how long to expect funding can vary. The process does usually take at least three to five days.
Consider online lenders for personal loans
Online lenders are an alternative to credit union loans. Many online lenders now offer low interest rates for borrowers with good credit and steady incomes. Even if your credit is average or low, you can usually find an online lender willing to give you a loan. Online lenders also offer substantially more money than credit unions. For instance, there are companies that offer up to $100,000, such as SoFi.
Searching for the ideal online lender is easy when you use SuperMoney’s loan offer comparison tool. This handy tool enables you to compare rates from a wide variety of lenders all at once. Just fill out one form and lenders will send you competing personal loan offers. Once you have the facts, you can make an informed decision about the best personal loan option for your financial situation.
JB
Julie Bawden-Davis is a widely published journalist specializing in personal finance and small business. She has written 10 books and more than 2,500 articles for a wide variety of national and international publications, including Parade.com, where she has a weekly column. In addition to contributing to SuperMoney, her work has appeared in publications such as American Express OPEN Forum, The Hartford and Forbes.
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