Is It Better To Get a Loan Through a Credit Union? (2024)

FAQs

Is It Better To Get a Loan Through a Credit Union? ›

In fact, the National Credit Union Administration's (NCUA) 2021 credit union and bank rates report found that credit unions offer significantly better rates across the board when compared to banks. All of this data naturally points in the direction of using a credit union to obtain any loan.

Credit unions can be ideal for a low-interest loan, lower mortgage closing costs, or reduced fees, but you'll need to qualify for membership. Larger banks may offer you more choices regarding products, apps, and international or commercial products and services, and anyone can join.

Better Loan Rates

Just like a typical bank, a credit union offers all products, from car loans to mortgages. However, they offer lower interest rates on loans because of a customer-centric model. They are not focused on generating profits for shareholders and are primarily aimed at creating value for their members.

Payment history is weighed the most heavily in determining your credit score, along with your total outstanding debt. 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 800.

Hard inquiry on your credit: Due to the hard credit check, you will likely see a short-term drop in your credit score when you formally apply for the loan. While this may not be detrimental to your long-term credit score, it could cause some harm to your credit if you apply for multiple loans in a short time.

Getting approved for a personal loan at a credit union can be challenging since you'll need to meet criteria to both become a member of the financial institution and get a loan. If you don't qualify with a credit union, consider applying for a personal loan with a bank or online lender.

Membership required. Credit unions require their customers to be members. Account holders must meet eligibility requirements to use the products and services.

With a credit union, you might have to do some extensive research to compare accounts and find out what services they offer. Credit unions only serve certain groups of people and if the ones you can join don't have mobile banking or their apps aren't up to par, that could potentially be a major disadvantage.

The main benefits of a credit union vs. a bank are that credit unions tend to offer better rates and customer service, lower fees, and a national network of ATMs.

What credit score do I need for a $3,000 loan? ›

Requirements for a $3,000 Personal Loan

However, most set a minimum. Discover, for example, requires a minimum credit score of 660, while some others require a minimum of 700. Most lenders consider your whole financial situation.

To increase your chance of qualifying for a $10,000 unsecured loan, you should have a credit score of 600 or higher. Some lenders start their minimum credit score requirements at 600, however, there are some lenders that require a credit score in the high 600s or low 700s.

The easiest types of loans to get approved for don't require a credit check and include payday loans, car title loans and pawnshop loans — but they're also highly predatory due to outrageously high interest rates and fees.

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.

Joining a credit union won't help build your credit score on its own, but it can be a good first step toward building your credit. Here are a few other ways that you can build your credit score: Use a credit card cosigner to increase your approval odds. Apply for a secured credit card, which requires making a deposit.

Because credit unions are not-for-profit, they can offer members numerous benefits that can directly and indirectly build an individual's credit score.

While a person's credit score is the major factor most lenders will look at in considering loan eligibility, credit unions tend to have more flexibility than banks when it comes to providing personal loans to people with bad credit or no credit.

Member-based mentality results in better customer service. Credit unions are owned by their members, so members are usually the focus of the institution. This means that credit unions are generally known for providing better customer service than banks. Nonprofit structure means better rates and lower fees.