Personal Loans from Credit Unions

[Dec 18, 2009.]

 

Many people turn to their local bank when seeking a personal loan. But banks aren't the only places  borrowers can get money. Credit unions also offer personal loans, so borrowers may want to investigate what kind of deals these institutions offer.

What Is a Credit Union?

Credit unions are nonprofit cooperatives that are owned by members. Some credit unions are offered through specific employers, churches, and other community groups. Others are open to anyone in the community. These institutions are governed mostly by volunteer boards. Banks are owned by outside stockholders and are controlled by board members who are paid. Credit unions pay dividends to members.

About 90 million people belong to credit unions, and membership in them grew 11% just in the third quarter, according to CBS News. More people have turned to credit unions after becoming fed up with poor service and loads of fees from banks.

Personal Loans vs. Payday Lenders

While many banks have pulled back on making personal loans, credit union loan portfolios have risen. That's due in large part to the fact that credit unions did not get hit by problems related to sub-prime mortgages. In many cases, credit unions are able to offer lower interest rates and fewer fees on personal loans than banks.

Some borrowers have even turned to credit unions for short-term loans instead of borrowing from payday lenders. But the National Consumer Law Center recently warned that some short-term credit union loans have high rates of interest that aren't much better than payday loans. People should make sure they look at the annual percentage rate (APR) of a loan to get the true cost of borrowing money.

Other Credit Union Services

In addition to loans, credit unions offer savings and checking accounts, auto loans, and credit cards. They also offer ATM cards with accounts, but it may be tough to find a credit union-owned ATM. Some credit unions waive or reimburse for fees related to using ATMs at other institutions.

In some cases where people are turned down for personal loans, they may be able to appeal to a credit union loan committee to have their application reconsidered. "While your credit history, income and expenses play the biggest role in whether you get a credit card or loan from us, we're also looking at your motivation and desire," Jeremy Trull, a marketing specialist for Idahy Federal Credit Union in Boise, Idaho, told Creditcards.com. "Maybe you had some bad financial luck in the past, and you're on your way up again. We'll take that into account."

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.