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Credit Union Home Loans

Credit Union home loans offer some of the lowest interest rates available in Australia – here's all you need to know about them

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, updated on August 8th, 2023       

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Credit unions offer many of the advantages of online lenders – such as some of the lowest interest rates available in Australia, simple application processes and great customer service.  Find out more about why a credit union could be worth considering for your next home loan and how comparing home loans with Savvy can save you thousands overall.

What are credit unions and how do they differ from banks?

A credit union is a not-for-profit financial institution which returns all profits back to its members through lower fees, better interest rates and higher yields on savings.  On the other hand, banks are for-profit institutions which are accountable to share-holders, who receive profits via dividends.

Credit unions are often region or community-based and can serve the needs of a specific group of people or regional area – for example, the Broken Hill Community Credit Union or the Illawarra Credit Union.  Banks tend to be Australia-wide and have less local community focus.

However, all credit unions (and building societies) are authorised deposit-taking institutions (ADIs) and are regulated by the Australian Prudential Regulation Authority (APRA), which is the same institution that regulates banks.  For this reason, credit unions are just as safe as banks.

Why are credit unions in Australia able to offer lower interest rates?

Credit unions redistribute all of their profits back to their members, which is why they’re called not-for-profit organisations.  They use these profits to lower interest rates for home loans and reduce fees (or sometimes charge no fees at all).  As soon as you take out a credit union mortgage or open a home loan account with a credit union, you become a member and so are able to take advantage of the decreased credit union home loan interest rates on offer.

In addition, credit unions traditionally have less infrastructure and salaries to pay, so their overheads are far lower than banks with branches in many high streets across the country.  For this reason, some credit union home loan rates in Australia are on a par with online lenders, who are known for offering some of the cheapest home loans currently available.

How do I compare credit union home loans?

To compare credit union home loans, first be very clear about what type of loan you want.  Of course, finding a loan with a low interest rate should be high priority, as even a small difference in interest rate will make a big impact on the amount of interest you pay, potentially saving you tens of thousands overall.  Your choices of loan type include:

  • a fixed interest rate loan – which is a loan with a set interest rate for a defined period of time, known as the term of your loan. If you take out a fixed rate loan, you will have certainty when budgeting and protection from interest rate rises – but you will be locked into the loan, and have few additional loan features to choose from
  • a variable rate loan – which will give you extra flexibility and a wide choice of additional loan features, but the interest rate will vary in line with national interest rates
  • a split rate home loan – which means you can split your mortgage into two portions, and have one on a fixed rate and the other on a variable rate. You are able to choose which portion of your loan is fixed and which is variable – for example, a 60/40 split or a 70/30 split.

Next – think about what loan features you may want to help you reduce your interest rate bill. Your choices of loan features include:

  • an offset account – which means any savings in your offset accounts reduces, or ‘offsets’, the money you’ve borrowed, so you pay less interest on the sum you owe
  • unlimited lump sum repayments – the ability to make additional repayments to your home loan to help pay it off more quickly
  • redraw facilities – if you have made additional payments off your home loan, you may want to be able to access these funds if life throws you a curveball.  It can be cheaper to redraw your additional payment funds from your home loan rather than take out a more expensive personal loan or car loan

Once you’ve worked out what type of home loan you’re after, and the loan features you really need, use Savvy to compare loans and lenders to find a loan that is the perfect fit for your family’s financial needs.

Pros and cons of credit unions compared to banks

PROS

Some of the lowest interest rates available

Credit unions are able to offer some of the lowest interest rates in Australia, which is great news for borrowers looking to get into the property market

Simple, user-friendly application processes

Credit unions rely on technology to offer their customers a simple and satisfying online experience, so they invest heavily in start-of-the-art user-friendly loan application software in the same way online lenders do.

More personal customer service

Because credit unions tend to serve a particular geographic region, it is in their interest to impress their customers with great customer service.  They offer a more personalised, local service than you may receive at a big bank.

CONS

Fewer branches

If you do want to visit the branch of a credit union in person, you’ll find there are far less credit union offices so you may have to travel further to find the closest branch office to you.

More limited range of loans

The big banks have a very wide range of financial products to offer, and will probably be able to satisfy the needs of almost every borrower.  The credit unions are not able to offer such a wide range of loans, so may not have a loan which is a perfect fit for your needs.  That’s why it’s important to compare credit union home loans with Savvy to find one that is just right for you.

Less accessible for non-standard applicants

If you find yourself in a position where you require a non-standard home loan, such as if you’re struggling with your credit score, have had defaults or bankruptcy or don’t have all the documents you need, credit unions probably won’t be able to help you.  This stricter loan criteria may mean you’re better off going to a specialist online lender.

Credit union frequently asked questions

Do I have to submit my credit union mortgage application online? 

No – credit unions do have physical branches which you can visit in person, although they tend to have fewer of these than the big banks.  However, if you choose to, you can complete the entire home loan application process online with your credit union.

How do you become a member of a credit union?

By applying to open an account or get a home loan you will automatically become a member of your chosen credit union.  You may be charged a small membership fee, which typically is around $5 a month.

Do credit unions offer introductory rates on home loans?

Yes – many credit unions do offer introductory rates, sometimes called honeymoon rates, on their home loans, particularly to attract first homebuyers as new customers.  These low interest rate loans may be fixed for a one- to three-year period, after which they revert to a standard variable home loan interest rate.

Do credit unions always charge lower fees?

Not always – however, because credit unions are not-for-profit organisations, their fees do tend to be much lower compared to some of the big banks.  It’s always worth comparing home loan fees with Savvy to make sure you’re getting the best deal possible across all mortgage lender options.

Do you have to be a member of a credit union before applying for a home loan?

No – you do not need to have been a member of a credit union to apply for a home loan with that particular institution.  You will automatically be made a member of the credit union when your home loan is accepted.

Am I better off applying to a credit union or an online lender?

This will depend on your personal situation and what type of borrower you are.  If you’ve had credit issues in the past or a history of bankruptcy, you may be better off applying to a specialist online lender.  However, if your credit history is great, you may find that credit unions offer the lowest home loan interest rates, fee structure and loan features.  Savvy can help you find the lowest interest rates and the best deal possible by comparing loans from a wide range of lenders.

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