A personal loan allows you to pay for just about anything. That includes unexpected emergencies, debt consolidation, a dream vacation or a business startup. You can often get the most favorable loan terms– including low fees and low interest–through a credit union.
In addition to using a credit union, you can implement the following 6 tips to make sure you get the best personal loan for your goals.
1. Know the Lingo
You’ll show lenders you completely understand your personal loan when you learn the lingo. This language may include:
- Application documentation – the proof of income and employment, bank account information and proof of other debt required by the credit union when you apply for a personal loan
- Loan amount – the exact amount of money you are borrowing
- Contract length or Term – the number of months you have to repay the loan in full
- Payment amount – the total amount of money you owe on the loan each month
- Annual percentage rate (APR) – the amount of interest you will pay on the unpaid loan balance
- Fixed interest rate – the amount of interest you will pay on the unpaid loan balance and the rate is locked in for the term of your loan
- Late payment fees – the charge added to your loan balance if you miss the monthly loan payment deadline
- Prepayment penalty – the charge you’ll owe if you pay off the loan early, if applicable
- Payment methods – the type of payment the lender will accept, such as automatic withdraw, online payment or in-person payment
Getting familiar with the terminology can go a long way during the loan process. But, you’ll probably still run into some words you’re not sure about–and that’s normal. If you’re talking to a lender or reading through a loan application and aren’t sure what something means, you should always ask or look it up!
2. Organize your Financial Information
Credit union loan officers consider your entire financial picture when you apply for a loan. While this generous practice can work in your favor, you want to be organized and prepared before you apply for a loan.
Start by assembling documents that prove your income and debt. Recent pay stubs, your tax return, and financial account statements reveal details about your finances and assets and help loan officers decide if you’re able to repay the loan.
Then check your credit report. Correct any errors and get ready to explain any missed or late payments that affect your score. While loan officers will review your entire financial record, your credit is an important factor in the loan approval process.
You can also share relevant financial information that doesn’t show up on your credit report, bank statements, or tax return.
For example, if you recently lost your job or faced a medical emergency that affects your income or assets, discuss your situation. Credit union loan officers have more leeway than other lenders and can take your extenuating circumstances into account as they assess your loan application.
3. Compare Loan Terms
Because credit unions serve the local community and focus on individual members, they often offer better loan terms than other lenders. Review the loan terms to ensure you get the best credit union personal loan.
First, review the interest rate. Federally chartered credit unions cap the annual percentage rate at 18% for most loans. Fortunately, the average interest rate on a 36-month unsecured loan is 9.47%, You could even qualify for a personal loan with an interest rate of as low as 2.24%. View our current rates here.
Some credit unions also offer an interest deduction if you select automatic withdrawal for your monthly loan payments.
Next, find out how much you can borrow. Sometimes, lenders limit the amount of money you can borrow via a personal loan.
Now, discover the loan repayment period. You’ll owe less money overall if you can select a shorter amount of time in which to repay your loan.
Finally, ask about fees. Some lenders will charge an application fee and other fees that credit unions don’t charge.
4. Choose a Secured or Unsecured Personal Loan
Secured and unsecured personal loans are two personal loan options. They both include fixed interest rates that depend on your credit, income, and debt. However, they’re also different.
Secured personal loans are designed for consumers with poor credit or other financial challenges. These loans require collateral, such as a savings account or share certificates. The credit union holds your collateral until you repay the loan in full. Select a secured personal loan if you have a spotty financial past or if you wish to build your credit history and financial standing.
Unsecured personal loans don’t require collateral. You may choose this option if you have a good credit score and history.
5. Shop Around
Credit unions can be large, small, and dedicated to certain communities or professions. The personal loan process, including approval criteria, interest rates, and application process, may also vary between credit unions.
Shop around to find the credit union that fits your needs. You may need to ask questions about the type of personal loans available, current interest rates, loan fees, and payoff terms as you choose the right credit union for you.
6. Transfer your Accounts
Personal loan interest rates are generally lower at credit unions. If you’re not a member already, review the eligibility requirements listed on the credit union’s membership page. Verify if you must live in a certain location or be part of a specific profession, civic organization or place of worship to join.
After you open an account, meet with a lending officer to discuss your personal loan or review your options on the credit union’s website. The application process, approval criteria and other loan details vary based on the credit union, so become familiar with the process as you prepare to apply successfully for your loan.
Make Sure You Get the Best Personal Loan For You
A personal loan helps you reach your financial goals. To get the best personal loan, turn to a credit union and use these six tips. This strategy provides you with favorable loan terms and assists you in reaching your financial and life goals.
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