how to get a loan from a credit union

How To Get a Loan from a Credit Union

April 9, 2022

Generally, you can obtain loans from online lenders, banks, credit unions, and other financial institutions. Most importantly, it’s economical to feature credit unions in your borrowing search. It will help if you learn how to get a loan from a credit union, among the most competitive loans available. However, it’s effortless to locate a credit union nationwide through The Mapping. Most credit unions aim at delivering financial services to their member-owners.

Credit union loans feature low rates and fees, which leads to a lower overall cost of borrowing. Credit unions charge low rates of interest not exceeding 3% per month. As an extra benefit, seeking approval for a loan via a credit union is less hectic. The best credit unions for bad credit no credit check offer lower interest rates and fees in the US. Additionally, a credit union may be more welcoming to borrowers with bad credit scores.

Moreover, credit unions mostly take a personal approach to evaluating your loan rather than a rigid approach with every application. You can acquire a personal loan from various institutions, including a traditional bank. While traditional banks branches are nationwide, credit unions often concentrate on their community. Thus, you must meet eligibility requirements to enroll in a credit union and borrow a personal loan.

What is a Credit Union?

Credit unions are financial institutions that operate similar to banks, except that members carry the ownership of the credit union. This entity is a non-profit-making money cooperative whereby members pool deposits together and borrow from the accumulated deposits at low-interest rates.

 Perhaps, credits unions aim to serve their members rather than focusing on earning a profit. For this reason, credit unions often provide better savings rates, lower loan rates, and low fees. However, you must attain specific requirements to be a credit union member. The eligibility for the best credit unions in California varies depending on how a credit union becomes organized.

With both credit unions, you can get services such as mobile banking, direct deposit, ATM access, and overdraft protection. Besides, the financial products available via credit unions include credit cards, mortgages, secured and unsecured personal loans, auto loans, and home equity lines of credit.

How Do You Become a Member of a Credit Union?

how to get a loan from a credit union

First, before applying for a loan, you must become a member or a partial credit union owner. To become a member, you must qualify by attaining some specific criteria. Besides, you must share some characteristics with Credit Union members like where you live or a similar company where you or your family members work.

On the other hand, you can find credit unions nearby through the National Credit Union Administration’s credit union search tool. If you can’t see anything local, numerous credit unions accept members from all over the US.

Immediately you select a credit union; you can enroll for membership by opening a credit union account, and giving a small deposit. Sometimes, it can be as little as $25, and after that, you’re good to go to apply for a loan.

How Do You Apply for a Loan from A Credit Union?

You can switch to a credit union and apply for a loan immediately in many circumstances. If you’re already a member, then talk with a loan officer at your credit union to know the types of loans available. And ask about the basic requirements for your loan approval.

However, the credit union loan process differs from place to place, but most companies feature similar requirements:

  • Application- You’ll have to complete an application, either online or on paper.
  • Identification– On the application, you’ll require to attach your identifying information, such as a Social Security number.
  • Employment- Some credit unions require you to be on the same job for a certain amount of time, mostly one year.
  • Income- You’ll require income to repay the loan, and you must disclose any debts to the credit union. Your monthly payments on all debts must be below a certain level. Your debt-to-income ratio looks at your total monthly debt payments verse your monthly income.
  • Creditworthiness– A consistent history of borrowing and repaying loans will allow you to get approved. Your credit score often tracks your creditworthiness.

After applying for a loan, the officer in charge will review your application to see if you qualify for the loan. Even when you don’t have a good loan repayment history, you stand a chance to get approval for a loan, more so at the best credit unions for small businesses. You can engage with a staff member who personally reviews your credit history and challenges. Sometimes, writing a personal letter can help.

Most importantly, getting a cosigner can also increase your chances of getting approved. A cosigner is an individual who signs an application with you. Such a person should have better credit than you and more income available to pay off the loan. Usually, a cosigner doesn’t make a payment, but this person is responsible for the loan repayment if you default payments.

What To Know About Credit Union Loans?

 i) You Must Be a member

The credit union has eligibility criteria for anyone who wants to join. Membership eligibility depends on a common bond among members, such as relationship with an existing member, location, or membership in a church, school, labor union, or homeowners association.

You can lookout for a credit union in your area using the National Credit Union Locator. Immediately you get a credit union you wish to join, confirm the membership requirements. If you qualify, you can contact the credit union directly to join.

ii) You May Enjoy Lower Interest Rate And Fewer Fees

The drive behind credit unions is to enhance the financial well-being of its members and not to get a profit. You can get more favorable loan terms for a credit union member, including a lower interest rate and fewer fees, rarely from a bank or other type of lender.

On the other hand, the federal credit unions don’t charge you an annual percentage rate, or APR, more than 18% for most loans they provide. However, the average APR for an unsecured 3-year loan from a credit union is much lower at 9.22%, according to the National Credit Union Administration statistics.

Most rates by the online lenders may charge APRs of up to 36%. Thus, with a lower APR, you will have lower monthly payments hence more savings. By charging lower fees, credit unions, including the best credit unions for personal loans, can continually give members smaller loans, making it a cost-effective option for personal loans.

iii) You Have Great Chances Of Approval

If you possess an excellent credit history, you can access favorable loan terms like low APR. Besides, credit unions still would work with you even if you’ve bad credit in the past. Some credit unions give loans to borrowers with poor credit or no credit history.

Thus, if you need to build your credit, managing your credit score can improve your chances of acquiring favorable loan rates and terms in the future.

Credit Union Compared to Bank Personal Loans

Banks and credit unions provide personal loans, but there is a big difference between banks and credit unions. However, you’ll have different experiences based on where you borrow from. Below are some of the highlighted gaps:

1) Banks Require Excellent Credit

If you have an outstanding credit score and belong to a traditional bank, you have an easy time qualifying for a personal loan. However, if you don’t have a good credit score, your bank might hesitate to work with you, even if you already own an account there. Interestingly, credit unions are a bit more lenient and can give you a loan in such a case.

2) Credit Unions Are Primarily Community-Based

Some credit unions allow anyone in the country to join, but most only serve community members. They’re owned and operated by members, not by a select few. If you want to be a member, you must attain specific requirements, including working, living, or worshiping in the community.

3) Customer And User Experience May Vary

Banks tend to have the capital to build a better online user experience. It can be through their website and mobile app and have more features that improve user experience. On the other hand, Credit unions may lack the user experience platform, but they tend to offer better customer service options than banks.

Bottom line

A credit union is a self-help cooperative that offers banks similar financial products and services. However, the Credit unions are member-owned and are not meant for profit-making like banks. When you want to borrow a loan, the members pooled savings service you. Members get loans at a low-interest rate, and to be part of a credit union, you must share a common understanding with other members.

Posted by Spencer Tierney
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Spencer Tierney is a writer and expert on certificates of deposits at transfermone.com. His work has been featured by USA Today, MSN, SF Gate, the Los Angeles Times, NerdWallet and more. He earned a bachelor’s degree in English at UC Berkeley.