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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 1 and 7 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 it 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. 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.
Pros and cons of credit union personal loans
- Non-profit. Credit unions are not-for-profit institutions. Unlike banks, any earnings a credit union makes are redistributed to its members in the form of small dividends, low interest rates, smaller fees and other perks.
- Competitive rates. Since credit unions don't operate with the motive of generating profits, they're often able to offer more-competitive interest rates than conventional banks or even online lenders. Credit unions have also been known to charge lower fees than these institutions too.
- More personal atmosphere. Credit unions are often operated locally and therefore have more of a friendly, personal atmosphere than big banks with numerous branches or impersonal online lending institutions.
- Use funds for any purpose. What you do with a credit union personal loan is up to you, provided you use the money for legitimate purposes.
- Bad credit loans. Some credit loans offer personal loans to individuals with poor credit. However, applying for such loans may require that you apply with a guarantor.
Cons
- Membership. You must be a member of a credit union in order to apply for a credit union personal loan. This means that if you are not already, you will have to join a credit union. In order to do so you may have to pay a nominal minimum deposit along with a membership fee.
- Limited services/locations. Because credit unions are usually local, they often only have a handful of ATMs and branch locations. This may mean that there are limited services in your area or it could potentially pose an issue if you were to move to another location or state.
- Less choice. You have fewer options if you limit your selection to only personal loans from credit unions.
- Slow turnaround. It could take weeks or months to get your funds with a credit union loan.
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 1 and 7 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 1 and 5 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 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 it better to get a personal loan from a credit union?
Whether or not a credit union personal loan is right for you will depend entirely on your personal and financial circumstances. It will also depend on factors such as where you live, your job, whether you are already a member of a credit union, etc.
While credit union personal loans generally have more-competitive rates than other forms of personal loan, they may not have the flexibility, features or the speedy turnaround that other loans provide. Therefore, it's always good to consider all of the features and benefits of various loans before making your decision.
Is it easier to get a loan from a credit union than a bank?
If you are already a member of a credit union, it may be easier for you to get a loan from your credit union than it would be for you to get one from a larger, more impersonal bank – even if your credit history isn't perfect.
However, if you are not already a member of a credit union, it may be more difficult. This is because you will have to become a credit union member in order to acquire a loan. You may also be required to build up some savings with your institution of choice before you are able to apply for finance.
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. 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.
What can I use a credit union personal loan for?
You can use a credit union personal loan for any legitimate reason. These might include:
How to compare credit union personal loans
Here's what to look out for when comparing credit union personal loans:
- Competitive rates. Some credit unions may provide a better interest rate than others. Interest rates from credit unions are available sometimes from as little as 4% p.a. However, the rates available to you may depend on your financial circumstances and income.
- Secured or unsecured. Credit unions offer both secured and unsecured personal loans. When comparing, it's important to decide which form of loan will work best for you. Loans that require asset security are often cheaper than unsecured personal loans, but carry a higher risk to you as a borrower. This is because if you default on your repayments, you run the risk of having your asset security repossessed by the lender.
- Interest and comparison rate. The interest rate is how much you will be charged on your loan. This is displayed as a percentage of your loan amount. A comparison rate is a more accurate display of the cost of the loan, as it also takes into consideration any mandatory fees that are included in the loan, as well as the interest rate. The comparison rate is often higher, but never lower than the interest rate. It is how much you will actually pay for the loan.
- Additional fees. These can include establishment, ongoing and administration fees, which will add to the overall cost of your loan. When comparing the cost of the loan, make sure you consider both the fees and interest rates in your calculations.
- Fixed or variable interest rates. The rate of interest for credit union personal loans can either be fixed or variable. A fixed interest rate stays the same over the loan period. In contrast, a variable rate of interest can change on a monthly basis depending on the interest rate set by the lender. You can choose based on what suits your circumstances.
- Loan terms and repayment. It's not just the interest rate and fees that need taking into consideration when comparing loans. You should also take into consideration the length of your loan. If you know how long you have to repay, you can calculate how much your repayments will be and the overall cost of the loan. This will help you determine what you can afford.
- Loan amounts. Minimum and maximum loan amounts are set by lenders and usually vary between $1,000 and $30,000 with credit union personal loans. Always check if the amount you need is within the range offered by the lender before you apply.
How to apply
To apply for any of the credit union personal loans displayed on this page, simply click "Go to site" to visit the lender's site directly and submit an application.
If you are not already a member of a credit union, you will need to join one before you can apply for a credit union personal loan.
To join a credit union, you will need:
- Australian driver's licence and/or Australian passport OR employment visa (if you hold a foreign passport)
- Medicare card
- Medibank private health insurance (if relevant)
- Australian Tax File Number or Taxpayer Identification Number
To be eligible for a loan, you will need the following documents:
- 100 points of ID proving your name and that you're 18 or over
- Proof you can pay off the loan, so you may have to submit bank statements and payslips or your online banking details
- Proof of address
- Proof of asset ownership (for secured loans only)
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 10–15 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 pay by cheque or in person.
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Hi I’m looking at getting at fixed rate personal loan, I don’t want high interest rates, no hidden cost or fees. I’m looking at borrowing 20,000 and I want to be able to pay it off over 3 to 4 years at no more then 160 a week in repayments. What are my options??
Hello Joe,
Thank you for your inquiry.
You can check your options for 3-year fixed-rate or 5-year fixed-rate, whichever would suit your needs. You can put in your loan amount and choose your term on the Calculator located at the top of each comparison table. Once you have chosen a particular lender, you may then click on the “Go to site” button and you will be redirected to the lender’s website where you can proceed with your loan application or get in touch with their representatives for further assistance.
It is worth noting to review your eligibility requirements and loan terms as this varies per lender.
Hope this helps.
Cheers,
Jonathan