Discover how a credit union personal loan can benefit you.
When it comes to applying for a personal loan you have a variety of options available to you – secured or unsecured, fixed or variable – and you also have a large number of lenders that are providing them. In your hunt for a loan you’ll come across banks, niche lenders and financiers, and you’ll also find credit unions. This guide will take you through credit union personal loans, how they’re different to bank loans and why you might want to apply for one.
How is a credit union personal loan different than a loan from a bank?
Credit unions function in the same basic way as banks, with the main difference being that credit unions don’t have any shareholders. Credit unions are not-for-profit and instead direct their profits back to their members by offering low interest rates and fees.
You might find a personal loan offered by a credit union personal loan charges lower interest and fees than the non-credit union counterparts. Other than this, credit union personal loans are largely standard products and don’t differ too much from bank loans. As credit unions are smaller, you may find less choice in terms of options, but you’ll find most typical loan products on offer.
Personal Loan Options from Credit Unions
Why should you consider a credit union for your personal loan?
A credit union does not generate profit for shareholders; it focuses on offering benefits to its members instead. When you apply for a loan through a credit union, you become a member of the credit union and you can look forward to benefits that all other members enjoy.
Australian credit unions tend to rate well on customer satisfaction parameters, so you can expect professional and ethical banking solutions. The focus on offering competitive rates and fees means you might be able to find a more affordable personal loan by turning to a credit union.
What are the features of a credit union personal loan?
- Interest rate. Personal loans offered by credit unions can charge lower rates compared to those charged by banks. Keep in mind rates differ between credit unions and you never know which lender will have the most competitive loan, so it always pays to compare your options.
- Loan term. Terms for personal loans typically vary between one and seven years, which remains the same for banks and credit unions. While longer terms result in lower repayments, you end up paying more interest.
- Minimum and maximum loan amounts. The minimum and maximum you can borrow varies between credit unions and between loans. The minimum you can borrow is $1,000, and the maximum is generally $30,000, although can be more.
- Repayment flexibility. Most credit unions give you the option to choose between weekly, fortnightly, and monthly repayments. With a variable rate loan you can usually make additional repayments without penalties, and some loans come with redraw facilities as well.
- Secured or unsecured. Certain credit unions offer secured personal loans, which you can secure using a vehicle or equity from a property. Secured loans charge lower interest compared to their unsecured counterparts.
What are my options when borrowing from a credit union?
- Personal loans. You can choose between fixed rate loans and variable rate loans as well as secured and unsecured loans. Loan terms typically vary between one and seven years.
- Car loans. Many Australian credit unions provide car loans. When you get a car loan the vehicle you purchase works as collateral until you repay the loan completely. You can take out one of these loans to buy a new or used car, with the loan term varying between one and five years.
- Credit cards. Credit unions provide different types of credit cards, from basic no-frills cards to platinum cards. You can usually get a MasterCard- or Visa-branded credit card through a credit union that you’re able to use globally.
- Lines of credit. Lines of credit work like credit cards, where you can access credit up to a given limit at any time and you pay interest on your outstanding balance. These may or may not come with a linked card.
- Overdraft. An overdraft comes linked to a transaction or savings account. With an overdraft in place, you can overdraw on your account up to a given limit.
Is there anything to consider?
Since credit unions tend to focus on serving local communities, their presence might be limited to certain regions or areas. This might means credit unions branch and ATM network is quite restricted. However, most give their members free access to rediATMs across Australia.
If you think you might have trouble repaying your loan, seriously reconsider taking out the loan in the first place. Not making timely repayments will see you paying late charges and this could also have a negative effect on your credit rating.
Make sure you go through the loan’s terms and conditions as this will give you a good indication of all applicable fees and charges.
Frequently asked questions about credit union personal loans
How can I apply for a credit union personal loan?
Depending on the credit union you choose to deal with, you can apply online, in person, or over the phone.
What eligibility criteria do I have to meet to apply?
You should be over 18 years of age, be a permanent Australian resident, have a regular source of income, and you should not have poor credit history.
How quickly can I complete an online application?
If you have all the required documents close at hand, you should be able to complete your application in around 10 to 15 minutes.
How can I make repayments?
Depending on the credit union you get your loan from, you can make repayments via direct debits, salary credit, online banking, and phone banking. You can also look forward to mailing cheques or making repayments in person.