Credit union loans work the same way bank loans do: You borrow money from a financial institution that you must repay, with interest, according to the terms of the loan. You'll need to join a credit union in order to qualify for a credit union loan, which may come with a lower rate and lower (or no) fees.
Credit unions typically offer lower fees, higher savings rates, and a more hands-and personalized approach to customer service to their members. In addition, credit unions may offer lower interest rates on loans. And, it may be easier to obtain a loan with a credit union than a larger impersonal bank.
If you get approved for a personal loan through a bank or credit union, you can expect to receive your loan money within one to five days—though some are faster than others. Alliant Credit Union, for example, provides same-day funding. Similarly, Wells Fargo usually disburses funds the following business day.
On average, credit unions tend to offer higher interest rates on deposits and lower rates on loans. Banks often adopt new technology and tools more quickly, especially online banks, which are typically able to offer higher-than-average interest rates.
Credit Unions may run credit checks when you apply to join. However, your score won't necessarily determine whether you'll be approved for membership. Instead, it may dictate which services you're eligible for.
If you search for loans with Experian, we'll include credit union loan offers if they match your credit information. All credit union and community lender products are marked with a 'Community Loan' badge. You can search for loans as many times as you like – it won't damage your credit score.
Disadvantages of credit unions
Membership is required: Credit unions require membership, which may be a hassle if you don't meet eligibility requirements and don't want to pay to become a member. Fewer product offerings: You may not have access to as many financial products with a credit union compared to a bank.
Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network like Allpoint or MoneyPass. Not all credit unions are alike.
The most common reasons for rejection include a low credit score or bad credit history, a high debt-to-income ratio, unstable employment history, too low of income for the desired loan amount, or missing important information or paperwork within your application.
Credit union loans often come with low rates and fees, which results in a lower overall cost of borrowing. 1 As an additional benefit, it can be easier to get approval for a loan through a credit union. Consider small credit unions.
Does joining a credit union build credit? Joining a credit union can help build credit, provided you follow the right steps. For example, if you join a credit union with bad credit, you may want to consider getting a secured credit card to improve your credit score. This is also an option if you're new to credit.
Though banks and credit unions don't check your credit score when opening an account, they will sometimes run your ChexSystems report. A ChexSystems report is a like a credit report for banks, displaying previous banking problems such as negative balances, frequent overdraft fees, bounced checks and fraud.
Some banks and credit unions make hard pulls, some make soft pulls and some don't check your credit report.
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
So we may refuse a loan application if we have not received sufficient ID. See our join page for further information about acceptable ID. Outgoings too high to afford loan repayments – if we can see that you are spending too much and won't be able to afford loan repayments then we will decline the loan application.
Generally, borrowers need a credit score of at least 610 to 640 to even qualify for a personal loan. To qualify for a lender's lowest interest rate, borrowers typically need a score of at least 690.
Many credit unions serve anyone that lives, works, worships or attends school in a particular geographic area. Membership in a group, such as a place of worship, school, labor union or homeowners' association may qualify you to join.
When you apply for a loan through a credit union, they look at your overall financial situation and job history to evaluate your creditworthiness, not just your credit score. The credit union process of getting approved for a personal loan may be more lenient and forgiving than that of a typical bank.
In general, lenders look for borrowers in the prime range or better, so you will need a score of 661 or higher to qualify for most conventional car loans.
What Is the Purpose of a Credit Union? The primary purpose in furthering their goal of service is to encourage members to save money. Another purpose is to offer loans to members. In fact, credit unions have traditionally made loans to people of ordinary means.
Members save with their credit union and create a communal pool of money available to be used for providing loans to other members. Interest charged on loans to members generates an income for the credit union.