Over four in ten Americans belong to credit unions, but this type of financial institution is often an afterthought for many individual loan applicants.
However, not considering credit unions as part of the shopping process could mean more payments. That’s why Federal Government Credit unions (details later on) will cap the unsecured personal loan interest rate at 18%. It may seem high, but not compared to the 35.99% rate cap for many popular banks and online lenders. Additionally, credit unions offer lower overall average rates than their competitors.
Certainly, credit unions have barriers to entry (including membership, we get to that), but if you’re in the market for loans, consider at least one credit union, perhaps one viewing fee and terms for the community. This is why.
| product | Credit Union Market Share |
|---|---|
| Personal loan | 36% |
| Automatic loan | 30% |
| Home loan | 4% |
| sauce: ACU (Data as of February 2025) |
For people, by people
That can become a common modestness for credit union members carrying cards everywhere. After all, these nonprofit institutions are member-owned, and their boards make up volunteers.
Like banks and online lenders, credit unions need to monitor their earnings. Still, longtime members may find tolerant eligibility criteria. Even if you’re a newcomer with substantial credits, you can still find lower interest rates than what your bank or online lender advertise.
Competitive interest rates (and not just big credit)
The Federal Credit Union Act establishes a 15% interest rate cap. Additionally, the National Credit Union Agency (NCUA), which is permitted to raise the cap for up to 18 months at a time, has set the current limit at 18% (until March 10, 2026).
This means that because federal credit unions (FCUs) cannot lend personal loans at rates above 18%, FCUs are an attractive option for consumers who receive credit card-like interest rates (up to 35.99%) from banks and online lenders. Think about how the cost of a two-year loan changes at $11,607 (average according to Transunion).
| Credit Union: Loan 1 | Online lender: Loan 2 | |
|---|---|---|
| Maximum Interest Rate | 18% | 35.99% |
| Monthly payment | $579 | $685 |
| Total cost of repayment | $13,907 | $16,447 |
| According to the bank rate Personal Loan Calculator |
What if you have good trust?
In addition to the low ceilings of the APRS, credit unions also have low interest rate floors in many situations. Consider that the average credit union’s personal loan rate was 10.75% in the first quarter of 2025, with banks averaged 12.03%.
“The reason credit unions offer members better rates than other lenders is not primarily because of the regulations they face, but because they are structured ways and because they are non-commercial, member-owned cooperatives.” “So… the profits that banks send to shareholders are sent back to members in the form of better rates.”
| product | Terminology (year) | Average interest rates for credit unions | Average bank rate |
|---|---|---|---|
| Unsecured personal loans | 3 | 10.75% | 12.03% |
| Used car loan | 4 | 5.93% | 7.82% |
| New car loan | 4 | 5.74% | 7.43% |
| sauce: delay |
Membership is easier than you think
It would be permissible to assume that credit union membership is too difficult. After all, many institutions are named after an audience they intended to serve in their establishment. Four of the country’s five largest credit unions are the Navy FCU, the state employee FCU, the Pentagon FCU (or Penfed), and the Boeing employee CU.
However, in reality, joining many of the country’s 4,600 or more credit unions is not a difficult task. CUS is especially true when applying for a personal loan, as you don’t usually have to become a member until or after your application is submitted.
| Many CUs make membership easy | Some CUs are more restrictive |
|---|---|
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However… individual loan eligibility is less clear to non-members
However, credit unions that offer personal loans are often less transparent about underwriting criteria. Compared to the average online lender, they usually publish less on their website and limit what a customer service representative can relay over the phone (trust me, we dialed).
For example, if you are a personal loan applicant who wants to know about the minimum credit score for a credit union, you will need some level of legwork (or application) to verify eligibility.
Long’s Rebuttal: Credit Unions exist to serve the community.
Long adds. “But that’s a realistic scenario. Will borrowers with credit scores in the 500s still have access to personal loans from them?
Personal customer service that gives you a higher rating
Of course, not all credit unions are created equally, and like financial institutions, borrowing from credit unions has its advantages and disadvantages. It didn’t take long to find credit union customers who complained about CU’s “primitive” online portal and difficult-to-reach customer service.
However, credit unions offer in-person services where online lenders are short on the line, and many members report a high level of satisfaction with the credit union’s overall services. Consider the JD Power satisfaction survey.
- The average satisfaction score for credit unions was 74 points higher than the average score for Banks (2025).
- For consumer lending, specifically, the Navy FCU has registered the second highest satisfaction rating of 787, one of the longest lists of primarily online lenders with an average rate of 702 (2024).
Conclusion
Like any other economic choice, deciding between a bank and a credit union is personal. One or the other may be the best for your needs, but I argue that it’s wise to include a credit union when you shop for a loan. A personal loan from a credit union may save you hundreds or thousands of dollars. When you’re ready to compare options, consider using the NCUA tool to find or research a credit union near you.
