Do Credit Unions Offer Student Loans?
After receiving your FAFSA offers, it might be possible that you still need more money to cover your college expenses. Private loans can seem to be a better route. However, credit unions also offer loans.
Student loans from these outlets usually offer competitive terms and a better experience.
What Are Credit Unions And How Do They Work?
Credit unions are member-owned nonprofit banks that provide many of the same services as traditional lenders. Although, being nonprofits, the rates and terms may be more favorable. These nonprofit banks have proved to be a beneficial resource for student loans. This is because they offer lower interest rates, among other reasons.
Here’s how these institutions work:
- They’re owned by account holders, or members. Any profit earned is either invested in the organization or paid to members as a dividend
- They don’t pay state or federal taxes
- They’re designed as cooperative financial institutions
- Members of the organization can work for the same company, attend the same college, can serve in armed forces, and can live in the same community
- The maximum interest rate of this nonprofit is 12%
- Every year, many of these institutions will offer substantial grant funding to students. These students will need to be attending third level education or any further education courses
Benefits Of Credit Union Student Loans
- Low interest rates: When it comes to private loans, these non-for-profit institutions offer more competitive rates than banks. Some will have very low rates. However, not all will offer desirable rates. You’ll have to shop around with different private student loan lenders if you’re looking to refinance your loan
- Credit unions work for the customer: These organizations work for the customers who use their services. After joining one, you’ll have a stake in their business. Make sure to check the reviews on the Consumer Financial Protection Bureau’s complaint database and the Better Business Bureau website
- Relaxed lending standards: With a private loan, a cosigner will be required if you don’t have a good credit score or steady income. This is also the case for nonprofit banks. However, if you or your cosigner are a member and have a good relationship, lending standards will be quite easy
Drawbacks Of Credit Union Student Loans
- You have to be a member: You’ll have to be a member first to get access to loans and there are different requirements for each organization. You’ll have to live or work in a specific area. Additionally, you’ll have to pay a deposit if your membership is approved. Thoroughly research before applying to be a member
- Not all credit unions offer student loans: Big banks operate mostly in every state, but nonprofit banks are situated locally. Not every institution will offer student loans, which can be challenging for borrowers
- Credit unions might not match big lenders: Private lenders have a customer base to support many special programs, which credit unions might not be able to. There are lenders like SoFi that offer in-school loans and refinancing that gives unemployment protection for borrowers
How To Get A Student Loan From A Credit Union
If you’re planning to take a student loan from a nonprofit bank, the first requirement is to become a member of that institution. You’ll have to fulfill the criteria required to be a member. This should be in connection to the university you’re planning to enroll in as a student. You’ll also have to pay a membership fee to join.
Before offering any student loan, the organization will ask you to submit checks and make deposits at the institution before moving ahead. You’ll have your credit score checked. Many institutions won’t allow you to pay off the loans until you graduate. Once you graduate, there are strict repayment options. This gives you less flexibility to pay off the loans.
The biggest consideration is whether you qualify to be a member of the credit union. If the answer is yes, you’ll need to compare the institution’s interest rates, membership fees, and other features with those of other top private student loan lenders. Consider collecting quotes from different lenders to figure out which option helps you save the most money.