How to Get a Loan Through a Credit Union

Just like applying for a loan from a bank, credit unions scrutinize your credit report require documentation proving you have the income to repay the balance. However, unlike banks, credit unions serve a particular "field of membership" -- referring to the common characteristics that its members share. This means you'll need to be a member before being approved for the loan. The good news is that there's no focus on profits at credit unions, which means they can provide loans at lower rates than banks.

Joining a Credit Union

Credit unions only offer loans to members, so you'll have to join one first. While different credit unions serve their own communities, and you may not qualify for every credit union in your area, you'll likely find one that meets your needs. Credit union membership qualifications may be based on:

  • Your employer or industry
  • Your location
  • Your family. If an immediate family member already is a member of a credit union, many credit unions will extend membership to you as well.
  • Group memberships, such as a church, educational institution or labor union.

Once you find a credit union, you'll need to purchase a par value share in the institution, which may take the form of a savings deposit. This deposit is generally small, anywhere from $1 to $25. You also might have to pay a one-time membership fee for setting up the account.


If you need help finding a credit union in your area, the National Credit Union Administration has a credit union location tool that can help you find one.

Getting the Loan

Once you're a member, the loan application process and underwriting process works much the same as it does at a commercial bank. The credit union checks your credit history and requests verification of your income and employment, and evaluates whether you're a likely candidate to repay the loan. You may apply online, over the phone or at a local branch.

However, some characteristics of credit unions can make this process more attractive for qualifying borrowers.

Structure and Rates

Credit unions are nonprofit organizations that serve their memberships, rather than for-profit banking institutions. This eliminates the focus on earnings and the desire to please stockholders -- only members receive a vote on how the company operates. As a result, interest rates on loans tend to be lower than what banks offer. The rate on a car loan, for example, can be more than two percentage points lower at a credit union than a bank, on average.

Customer Service

U.S. News & World Report notes that the credit union structure lends itself to customer service in a way that banks may not. If you have sub-par credit due to extenuating circumstances, like a default judgment on your record that occurred when you missed work for medical problems, a credit union representative may be more willing to work with you to secure the necessary funding. Credit unions aren't as driven to sell loans as a bank might be, because its employees ultimately work for the benefit of members. As a result, you'll likely find a host of resources to educate you about the nature of the loan you're considering, and you are more likely to get an unbiased view on what's in your best interest rather than a sales pitch for a specific loan type, reports U.S. News.