You’ve probably heard a horror story or 10 about payday loans (like the one about the guy who racked up $50,000 in debt from a $2,500 loan). Heck, maybe you’ve even gotten sucked into the seemingly never-ending cycle of payday loans. Payday loans, also known as payday cash advances and installment loans, are geared toward consumers with bad credit. They’re meant to be a short-term solution, but many loan recipients spend months – sometimes even years – trying to pay off loans for a few hundred bucks.

Depressing, right?

Yes, but it’s safe to assume the majority of folks don’t intentionally flake on payments or take their time repaying their debts. Payday loans have outrageous interest rates that trap consumers in a cycle of debt that’s nearly impossible to escape. Some states have established interest-rate caps in an attempt to regulate the practices of predatory payday lenders, but unfortunately these caps aren’t common across the nation. That’s why payday loan recipients often battle interest rates higher than 650% for $300 payday loans in Texas, Idaho, Ohio, Utah, and Nevada.  

So, what’s the solution?

Consider credit union personal loans before you resort to last-ditch options like payday cash advances. We’ve got detailed information on personal credit union loans below so you can decide if applying for one is a smart choice for you.

How do you get a credit union personal loan?

Visit your local credit union and speak with a financial representative, or apply online if that option is available. Keep in mind that even if you apply online, you may have to visit a branch in person to sign your loan documents or provide requested verification.

Here are some things your credit union might request:

  • Photo identification, such as a driver’s license or passport
  • Tax returns from the last 1 to 3 years
  • Recent check stubs or payment receipts from an employer
  • Statements from your checking and savings accounts
  • A list of business and/or personal references

Your credit union may require additional documents before approving your loan. If you have recently paid off debts that still appear on your credit report, bring proof of payment when you apply for a loan.

What if I don’t belong to a credit union?

Join one! There’s usually a small fee, like $10 or $20, for new members. You generally have to verify that you work or reside in the city or county where the credit union is located, but sometimes exceptions apply.

Banks often offer loans to non members, but you probably won’t be able to apply for a credit union loan until you obtain membership.

Who qualifies for a personal loan from a credit union?

It depends on the requirements established by the credit union. Here are some factors that may help speed up the approval process:

  • Good or excellent credit
  • No active or recent bankruptcy status
  • A stable payment history to other debtors from the last 6 to 12 months, possibly longer
  • No recent court judgements, liens, or collections
  • Steady employment or self-employment history
  • A minimum of 1 to 2 years at your current address

If you don’t meet these requirements, it doesn’t mean you’ll get rejected. Even if you do meet them, you won’t necessarily get approved. A credit union just wants to know that you’re not a risky applicant, which is why they rely on requirements like the ones above.

What can you do with a credit union personal loan?

Whatever you want! Well, as long as it’s legal in your state.

Here are some common reasons why people request credit union personal loans:

  • Debt consolidation
  • Medical or dental expenses
  • Home improvement
  • College or technical training
  • Automobile replacement or repairs
  • Vacation expenses
  • Marriage or wedding costs
  • Emergency situations, such as foreclosure or eviction

Just keep in mind that a personal loan from a credit union is a line of credit, not free cash. Don’t request a loan for frivolous expenses or knowingly accept a larger line of credit than you can handle.

How do you repay a personal loan from a credit union?

Each credit union has its own unique repayment process for personal loans. Here are some repayment options you might have:

  • Direct debit or ACH payments on an agreed-upon schedule
  • Check, money order, or cashier’s payments delivered via postal mail
  • Cash payments dropped off at the branch where you received your loan or another participating location
  • Credit card payments

You may have other repayment options available. Before you accept a personal loan, make sure you understand when and how to repay the funds.

What if you can’t afford your loan payments?

It’s frustrating to fall behind on a personal loan, but sometimes it happens. Start by contacting the credit union as soon as you realize you might miss a payment. Don’t wait until you’re already behind; keep your credit union in the loop.

If you generally make your loan payments on time, you may have a chance to postpone your due date or have a late payment fee waived. Don’t be afraid to request these perks if a financial representative doesn’t offer them.

Remember, late payments can negatively impact your credit report. That’s why it’s essential that you speak to someone from your credit union ASAP if you have a financial crisis. Letting your credit union know what’s going on may save your credit score.

Still not sure you should get a personal loan from a credit union rather than a payday lender?

That’s okay. Take some time to decide what’s right for you.

Just remember that payday loans are an expensive form of credit that can keep you trapped if you don’t pay them off in a timely manner. We recommend that they remain an emergency option. First consider borrowing money from family members or obtaining a line of credit from your local credit union.

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