Credit Union Personal Loans
Learn about how to compare personal loans from credit unions and find the best deal for you with Savvy today.
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How do credit union personal loans work?
In terms of its function, personal loans from credit unions are the same as any other: they’re a loan designed for personal use with essentially no restrictions on how they can be used. Whether you need some extra funds for help funding renovations around your home, to consolidate outstanding debts or to go on holiday, a cruise or even your honeymoon after getting married, a personal loan can be the financial boost you’re looking for.
The amount you borrow is subsequently repaid over an extended period of your choosing, generally ranging from one to seven years, with interest and fees. These are both key areas of comparison when it comes to personal loans, as they dictate how much yours will end up costing you over the course of your term. Some fees are avoidable, however, such as ongoing monthly fees, establishment fees and early repayment fees.
How are credit union personal loans different to other lenders?
The key difference between personal loans from credit unions and other lenders like banks is that they’re (more often than not) cheaper. This is because while banks are owned by shareholders, credit unions are member-owned and run and plunge profits back into the union to facilitate benefits for their members. These most often come in the form of rate and fee decreases, which can be crucial in the long run in terms of saving you money. To highlight this, you can look at the following example:
A $30,000 personal loan taken out over five years at an interest rate of 8.5% p.a. would cost $615.50 per month and $6,929.76 in interest overall. However, finding the same loan at a rate of 7.5% p.a. instead would save just under $15 per month ($601.14) and almost $900 in interest ($6,068.31).
However, credit unions aren’t generally the cheapest in the market, as smaller online private lenders can more consistently offer the most affordable rates and fees to their customers. The other key advantage that these lenders hold over credit unions is their flexibility when it comes to eligibility requirements. While there’s a wealth of specialist lenders who cater to diverse financial situations, such as those with bad credit or lacking the right documentation, this isn’t the case for credit unions. They’re more like banks in this respect, as they tend to stick to borrowers with stronger backgrounds.
As such, it’s also important that you compare these alternative options with Savvy. We’re partnered with a range of lenders who can work with you no matter where your finances sit, offering some of the cheapest interest rates in the market as well. You can start comparing here today, have your loan chosen and receive your funds in as little as 24 hours.
How to save money on your credit union personal loan
Improve your credit score
First and foremost, entering your personal loan application with as strong a credit score as possible will instil greater confidence in your credit union when it comes to determining the risk factor of the loan. This number indicates your success taking on and repaying debt in the past, so the higher it is, the better your record. Having a good credit score will help you minimise your interest rate and potentially reduce the fees you’re required to pay.
Pay with savings
A common way for people to reduce the amount of interest to be paid on their loan is to supplement their purchase with their savings. This essentially functions as a contribution to your loan without interest payable. For example, taking out a four-year $20,000 personal loan at 8% p.a. to cover the entire cost of renovating the back of your house would cost you almost $1,000 more than a $15,000 loan with the other $5,000 paid out of your savings.
Compare loans with low fees
Interest isn’t the only area to consider with regard to the cost of personal loans. Each loan will come with a set of fees for you to pay in addition to its interest, but they may not always be charged by your lender. These fees and their potential price ranges include:
- Ongoing fees: $0 to $20 per month
- Establishment fee: $0 to $600
- Early repayment fee: $0 to $600 or more
- Late payment fees: $15 to $50
Choose a shorter term
By paying your personal loan out over a shorter loan term, you expose yourself to less interest and fees over the course of your loan. This is because of the way that interest is calculated: the longer the loan, the slower it amortises, meaning you pay more. For instance, paying a $30,000 loan at 7.5% p.a. over four years instead of five would cost around $125 more each month, but save you over $1,200 in interest alone.
Apply with your partner
Finally, one of the ways you might like to reduce the interest rate on your loan is by submitting a joint application with your partner. This means that the two of you share the responsibility of repaying your personal loan, relying on two sets of income rather than one and making it appear safer from a lender’s perspective as a result. A guarantor, who agrees to take on the personal loan should you not be able to complete payments, will achieve the same effect.
