How To Get A Loan From A Credit Union

How To Get A Loan From A Credit Union

Written by Lisa Rennie
Fact-checked by Caitlin Wood
Last Updated April 27, 2021

If you need a loan, you have a few options when it comes to where to obtain one, and that includes applying with a credit union, for example, Meridian or Desjardins. A loan from a credit union comes with a few perks, including lower rates and fees, which can translate into major savings. Plus, you might have better luck getting approved for a credit union loan with bad credit compared to going to a bank.

If you’re thinking of applying for a loan from a credit union, here are a few things you need to know first. 

What Is A Credit Union?

Credit unions are a lot like banks: they allow consumers to open up savings and checking accounts, provide products like credit and debit cards, and even offer loans like mortgages and loans. They have typical brick-and-mortar branches and ATM machines like banks, too. 

But there are certain differences between banks and credit unions. For starters, credit unions -unlike banks – are owned by their depositors instead of shareholders. People who bank with credit unions are considered members, and credit unions are more focused on serving these members as opposed to their bottom line. Further, credit unions are not-for-profit entities, unlike banks that seek to beef up their revenues as their main priority.  

Credit unions may have certain criteria when it comes to who can become a member. Some credit unions may accept anyone who lives within a certain distance from the credit union, while others may limit their membership to those who belong to certain companies or labour unions, for instance. 

Regardless of their differences, credit unions provide loans to their members, including those who may not have the credit score and financial profile needed to secure a loan with a conventional big bank.

Basic Requirements To Get Approved For A Loan With A Credit Union

As already mentioned, you’ll likely need to be a member of a credit union in order to secure a loan with one. The good news is that you may be able to apply for membership and a loan at the same time. But if you’re already a member, the process can be progressed a lot quicker. 

In order to get approved for a loan with a credit union, you’ll need to meet a few requirements, including the following:

Become a member. Again, this will be a requirement to get a loan with a credit union, but you may be able to simultaneously apply for both membership and a loan at the same time. 

Application. Like all other types of loans, those that are supplied by a credit union will start with an application that is to be filled out and submitted to the credit union. Depending on the credit union you are applying with, you may even be able to do this all online.

Supply personal identification. You will need to provide various pieces of information on your application, including identification, such as a social insurance number. 

Employment status. You will need to be employed in order to get approved, and depending on the credit union you deal with, you may be required to have been employed with the same company for a certain amount of time to prove stability in your job.

Income. In order to be able to repay your loan – plus interest – with no troubles, you’ll need to show that you have an adequate income that can support your loan payments every billing cycle. 

Debts. The credit union will want to know how much debt you are carrying, particularly as it relates to your income (do you know what your debt-to-income ratio is?). More specifically, your credit union will want to know that most of your income is not dedicated to paying off your current debt. Generally speaking, no more than 43% of your income should be dedicated to paying your monthly debt bills.

Down payment. Some loan types will require a deposit or down payment upfront, such as a car loan or mortgage. You will need to come up with a certain down payment amount before the credit union will supply you with a specific loan amount. 

Credit history. Your credit history will be looked at, which will tell the credit union what your history of making bill payments is like. If your payment history is positive, your credit score should be healthy, which is precisely what credit unions want to see.

Learn more about how payment history affects your credit score.

How To Become A Member Of A Credit Union

Before you apply for a loan with a credit union, membership will be required, as previously noted. In order to become a member, you will need to meet some criteria, including the following:

  • Identification. You’ll be required to provide certain pieces of ID that are current and not expired, such as your social insurance card, driver’s license, passport, or permanent Canadian resident card, for instance. 
  • Fee. You may be required to supply a small upfront fee to your credit union that will be put toward investment in shares in order to become a member-owner, which will allow you to vote on issues that affect the credit union and even in the election of the credit union’s board of directors. 
  • Personalized check. A personal check from a Canadian financial institution will be payable to the credit union that includes your full name, address, and account details.
  • A resident of the province. You will need to be a resident of the province that the credit union is located in.
  • Age of majority. You must be at least 18 years of age to apply for membership at a credit union.

The application process should not take too long to complete. Once the credit union reviews your membership application, you’ll be contacted with instructions on how to proceed further.

Pros And Cons Of Getting A Loan With A Credit Union

There are obvious perks to getting a loan from a credit union, including getting access to much-needed funds. But there are other advantages to these loans, as well as some drawbacks that should be considered.


Bad credit accepted. Applying for a loan at a conventional bank with a poor credit score will almost always result in a rejected application. But at credit unions, less-than-stellar credit is usually okay. That said, you may still need a qualified cosigner or some collateral to secure a loan at a credit union with bad credit.

Non-profit. Since credit unions are non-profit institutions – unlike banks – whatever credit unions earn is redistributed to its members through perks such as dividends, low-interest rates, and lower fees.

Competitive rates. As mentioned, credit unions may be able to offer lower interest rates, making their loans more affordable than banks in this case. That’s because credit unions are not in the business of generating a profit, so they’re in a better position to offer more competitive interest rates. 

Funds can be used for any purpose. How you use the money you are given through a credit union loan is up to your discretion, as long as its use is for a legitimate purpose.

More tailored loans. Since you are a member of the credit union, you may be able to get a loan that’s more tailored to your needs.


Must be a member. The most obvious downfall of applying for a loan at a credit union is the fact that you must be a member. If you’re not interested in membership at a credit union, you may have to look elsewhere for a loan. 

Slow funding time. Although applying for membership and a loan may not take too long, it could take a while before you are actually approved, and then even longer before you’re given access to the funds. 

Fewer choices. Your credit union may have more limited loan options, so your choices are fewer. 

Chance of loan rejection. There is always the chance that your loan application gets rejected, even after having gone through the steps of becoming a member. 

Is Your Loan Offer From A Credit Union A Good Deal? 

Before you take out a loan at a credit union – or any other financial institution – it’s important to make sure that the loan product you take out is the best deal you can find. That entails doing a little comparison shopping among various credit unions and even comparing these loan products to those that are offered by conventional banks. 

Be sure to look at the following details before determining which loan is best for you:

Interest rates. The interest rate you are charged will directly determine how much you will have to repay by the end of the loan. Even a fraction of a percent makes a big difference, so be sure you carefully assess the rates that come with each loan product you look at.

Learn how lenders set their interest rates and how to fit one that works best for you.

Fees. Not only is the interest rate involved extremely important in determining the overall cost of your loan, but so are the fees involved. A lower interest rate might not necessarily mean a cheaper loan if the fees compensate for any money saved, so be sure to find out all the fees involved in the loan you apply for. 

Terms. Find out all the rules that apply to the loan that you must follow. For instance, there may be rules regarding early repayment or double-up payments. If you decide to repay your loan early after coming upon extra money at some point, you could wind up having to pay a penalty fee, which can cost you when all is said and done.

Loan amount. How much money do you need? How much can you get approved for? Your loan amount will depend on the credit union, the loan type you apply for, and your financial and creditworthiness.

Final Thoughts

There are a handful of advantages to seeking out a loan from a credit union, including potential savings in lower rates and fees, as well as a better chance of loan approval with bad credit. Just make sure you consider all your options before choosing to work with a credit union, it’s always important to find the best fit based on your financial needs.

Rating of 5/5 based on 9 votes.

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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