Credit Union Debt Consolidation

If you’re considering a debt consolidation loan, a credit union could be a great option. Understand the benefits of working with a credit union.

Choose Your Debt Amount

- OR -

Home > Debt Consolidation > Credit Union Debt Consolidation

One of the common ways to consolidate debt is with a low interest debt consolidation loan that would be used to eliminate high interest credit card debt. Ideally, debt consolidation loans combine multiple accounts – typically credit cards – into one account at a reduced interest rate and there is a definite end date for the payments.

A debt consolidation loan only works if it saves you money. The interest should be considerably lower than what you’re paying on your credit cards, fees should be low or non-existent and the monthly payment should work with your budget.

Credit unions are a good source for debt consolidation loans, or personal loans, as they are often called. Credit unions are more flexible about approving debt consolidation loans than traditional lenders, like banks.

But credit unions also come with some requirements that may not be the best fit to consolidate debt.

What Is a Credit Union?

A credit union is a member-owned financial institution. It operates similar to a bank in accepting deposits and lending money, but its fees and fees and rates are usually lower than those at banks because it is a nonprofit. Credit unions are known for customer service and community involvement.

Credit unions are federally insured just as banks are. Instead of the Federal Deposit Insurance Corp. (FDIC), that backs banks, credit unions are backed by the National Credit Union Administration (NCUA).

Credit unions have requirements for membership. Some are career-based, for instance requiring membership in a teachers’ union or government employee union, or open only to employees and retirees from a specific business. Many have regional requirements – you must live in a certain county or region to join. In recent years, some credit unions have gone national, and membership may be based on donating a small amount to a specific nonprofit, or simply opening an account, usually with a minimum as low as $5. These accounts are often called “share accounts,” because it means acquiring a share of the credit union.

Some credit unions are designated as Low-Income Credit Unions or Community Development Credit Unions and offer small loans and other services to members who wouldn’t normally qualify because they don’t make enough money.

Why Choose a Credit Union for Debt Consolidation?

Credit unions are member-owned nonprofits, they don’t have to please corporate shareholders or focus on making a profit. If you’re a member, you’re an owner. While that doesn’t mean it’ll make you wealthy, it does mean that you will likely pay less and earn more than you would at a traditional bank. Some credit unions also issue year-end dividends to members.

Some credit unions offer loans specifically for debt consolidation, but most offer personal loans that can be used for debt consolidation. Credit union members in the U.S. in 2023 were paying on $1.56 trillion in loans, with the average amount owed $17,511. The figure includes personal loans as well as auto loans and mortgages.

Most credit unions base their interest rates on creditworthiness. They are flexible when it comes to credit score and other borrowing factors, particularly for long-time members.

If you want to apply for a credit union debt consolidation loan, but are considering it as an option, it’s a good idea to open a share account at a credit union and build a relationship with the institution. If you decide to apply for a loan, your relationship with the credit union will likely pay off. If you decide not to apply for a loan, you will still have the advantage of having an account at a credit union.

Things to look out for when researching credit union debt consolidation loan lenders are application or origination fees. These are either flat fees or a percentage of the loan that’s charged upon disbursement and are common with banks and online lenders.

The fee is deducted from the amount you borrow, but still included in the amount you must pay back and pay interest on. While most credit unions don’t charge such fees, some do. Research your options carefully and look for credit unions that have no fees and an interest rate that works with your budget. Chances are you will find one.

Some of the advantages of belonging to a credit union are:

  • More competitive interest rates, including lower rates on loans and higher rates on savings accounts
  • Faster loan approval
  • Possibility of easier loan qualification
  • Lower fees, or no fees, for accounts and services
  • Better customer service
  • Nationwide ATM network can mean no-fee withdrawals at non-member ATMs

Credit Union Membership Requirements

Almost all credit unions require that you open a share account and become a member in order to apply for a loan. After that, membership requirements differ with each credit union.

The most common membership requirements are:

  • Residence or employment in a town, county, or region
  • A professional affiliation (teacher, government worker, military member)
  • Employment at a specific business
  • Graduate of a specific college or university
  • Membership with, or donation to, a specific nonprofit

Most credit unions also allow the immediate family of members to join.

Credit unions spell out their membership requirements on their websites, so it’s easy to research which one would be a good fit.

The NCUA online credit union locator can help you find credit unions in your area. The locator also has a research tool, so you can review the details of a specific credit union.

The Best Credit Unions for Debt Consolidation

Once you do your research, you may find that a local credit union is your best option. there are also credit unions available in all 50 states, most with a robust online presence, that you should take a look at if you’re considering a credit union debt consolation loan.

Keep in mind that rates and other information can change fast. APRs cited online by credit unions, just as with other lenders, are best-case scenarios. Credit unions can charge up to 18% on a long-term personal loan. The lower your credit score, the higher your rate will be. Many credit unions also have higher interest rates for longer-term loans, meaning you’ll pay a lot more interest if your term is lengthy.

The best fit, ultimately, is what works best for you and your financial situation. Some of the best credit unions for debt consolidation are:

1. Affinity Federal Credit Union

  • Type of loan: Personal, unsecured
  • APR: 13.75%-18.25%, 0.25% reduction if payment is by automatic withdrawal from Affinity savings or checking account
  • Loan size: Amount of debt being consolidated.
  • Origination fee: No
  • Payoff period: 12-120 months.
  • Membership requirements:  $5 membership deposit
  • You should know: Debt consolidation loan applicants are required to complete a free course, “Creating a Budget and Sticking to It” before their loan is approved; Affinity is nationwide, but only has branches in New York, New Jersey, and Pennsylvania.

2. Alliant Credit Union

  • Type of loan: Personal, unsecured
  • APR: 11.79%-18%
  • Loan size: $1,000-$1000,000
  • Origination fee: No
  • Payoff period: 12, 24, 48, or 60 months
  • Membership requirements:  Must be employed by, or retired from a business or organization that partners with Alliant; domestic partner or immediate family member of an Alliant member; live or work in a community near corporate headquarters in Chicago; or be a member of Foster Care to Success (FC2S).
  • You should know: Alliant is an online-only bank, so does not have the face-to-face option of a local credit union. It is part of an ATM network with more than 80,000 locations.

3. Connexus Credit Union

  • Type of loan: Personal, unsecured
  • APR: 9.99%-18.49%, depending on length of loan, amount, creditworthiness. Borrowers get 1% discount if they register for digital banking and subscribe to e-statements, and another 1% discount if they auto-pay electronically.
  • Loan size: $1,000-$50,000
  • Origination fee: No
  • Payoff period: 12-84 months
  • Membership requirements: Employee of a business or member of an organization affiliated with Connexus; or resident of one of 41 communities in branch areas; or $5 one-time donation to Connexus Association and $5 deposit into savings account.
  • You should know: Connexus has a $5 monthly inactivity fee if you don’t use your share account.

4. First Tech Federal Credit Union

  • Type of loan: Personal, unsecured
  • APR: 8.99%-18% based on creditworthiness, length, and amount of loan
  • Loan size: $500-$50,000
  • Origination fee: No
  • Payoff period: 24-84 months
  • Membership requirements: Work for one of 900+ partner companies; a family or household member is a member; work for state of Oregon; live or work in Lane County, Oregon; become a member of the Computer History Museum or Financial Fitness Association
  • You should know: Borrowers have the option of deferring their first payment up to 45 days from the funding date, but it may affect APR and total interest paid.

5. Lake Michigan Credit Union

  • Type of loan: Personal, unsecured
  • APR: 8.99%-18.00%
  • Loan size: $250-$25,000
  • Origination fee: No
  • Payoff period: 24-60 months
  • Membership requirements: Live, work or worship in Michigan’s lower peninsula or Florida; have a family member who is a member; donate $5 to the ALS Foundation (Amyotrophic Lateral Sclerosis) and join the credit union for an additional $5.
  • You should know: Rates and terms aren’t readily available on the LMCU website, you will only find out current rates by applying, calling the credit union, or visiting a branch.

6. NASA Federal Credit Union

  • Type of loan: Personal, unsecured
  • APR: Begins at 10.09% “for highly qualified individuals.” No maximum available.
  • Loan size: $1,000-$30,000
  • Origination fee: No
  • Payoff period: 24-84 months
  • Membership requirements: NASA employees and retirees; member or employee of affiliated organization or business; relative of a member; become member of National Space Society (first year free).
  • You should know: Maximum APR rates are not available on the website, and to get updated rate information, you must visit a branch office, call, or send a message through the website.

7. Penfed Credit Union

  • Type of loan: Personal, unsecured
  • APR: 7.74%-17.99%
  • Loan size: up to $50,000
  • Origination fee: No
  • Payoff period: 24-60 months
  • Membership requirements: Must open checking account with a minimum of $5.
  • You should know: Length of PenFed Credit Union membership is one of the factors, as well as creditworthiness, which plays a part in how low your APR will be.

8. Service Credit Union

  • Type of loan: Personal, unsecured
  • APR: Starts at 11.24%
  • Loan size: Up to $50,000
  • Origination fee: No
  • Payoff period: 12-60 months
  • Membership requirements: Active duty military, veterans, and their families; employees or retirees of the Department of Defense and their families; employes of affiliated businesses; members of the American Consumer Council or the Financial Fitness Association.
  • You should know: Website doesn’t give a maximum APR; up to a .75% reduction is available for borrowers who have a Direct Deposit+ checking account, but the exact amount depends on credit worthiness and the tier qualification must be maintained for the life of the loan.

Other Options if You’re Struggling Financially

A credit union debt consolidation loan can provide debt relief to the right person. But if you have a low credit score, it may end up costing you more monthly than you can afford to spend.

If you can’t find a credit union debt consolidation loan that fits your financial situation, or simply don’t want to borrow money to pay off debt, there are debt relief alternatives. The benefit, too, is that they don’t rely on a good credit score.

Credit Counseling

If you are having trouble paying your bills every month, or just would like to get rid of some debt, credit counseling is a good first step. A nonprofit credit counseling agency representative will review your finances with you, help you create a budget and discuss the debt-relief options that fit best with your situation. Nonprofit credit counseling agencies are required by law to give you advice that’s in your best interest rather than sell you a product. They may suggest debt relief options that include debt consolidation, debt management, debt settlement or even bankruptcy. They’ll also point you to financial literacy and other resources that will help you better deal with your finances.

Debt Management

Debt management plans are not loans and don’t require a good credit score. They are offered by nonprofit credit counseling agencies, which work with your creditors to lower your interest rates and waive fees on unsecured credit, like credit cards. You make one fixed monthly payment to the agency,

which pays down your credit cards and other unsecured debt in 3-5 years. Since it’s a fixed payment, and interest rates are lower, a DMP will not only cost you less than a month than what you’re paying on credit cards, but also will cost you a lot less overall. On-time payments and lower balances will improve your credit score as the plan moves forward.

Debt Settlement

You or a debt settlement company negotiate with the creditor to reach an agreement that is less than what is owed. In some cases, you only pay 50%-60% of what your outstanding balance. The downside is that while you make monthly payments into an escrow account until the lump sum of the agreement is reached, your credit score will continue to go down and debt collectors will continue to call. The process usually takes 36-48 months. Fees can also eat up much of the savings.

Nonprofit Debt Settlement

Nonprofit debt settlement, sometimes called “Less than the Full Balance” program, is offered by nonprofit credit counseling agencies as an alternative to traditional for-profit debt settlement. There is no negotiating involved. You agree to pay 50%-60% of your balance in equal payments over 36 months to settle the debt. There are strict eligibility requirements, and because it’s a new program, not all creditors partner with credit counseling agencies on it.

About The Author

Maureen Milliken

Maureen Milliken has been writing about finance, banking, investment, entrepreneurship, real estate and other related topics for more than 30 years. She started as the “Business Beat” columnist for the now-defunct Haverhill (Mass.) Gazette and currently is one of the hosts of the Mainebiz business-focused podcast, “The Day that Changed Everything” in addition to her daily writing. She also is is the author of three mystery novels and two nonfiction books.


  1. N.A. (2021, December) 2021 Financial Literacy and Preparedness Survey: Key Findings-General Population. Retrieved from
  2. N.A. (2023, August) What do I need to know about consolidating my credit card debt? Retrieved from
  3. N.A. (2023, August 8) Total Household Debt Reaches $17.06 Trillion in Q2 2023; Credit Card Debt Exceeds $1 Trillion. Retrieved from
  4. N.A. (2023, June) Industry at a Glance. Retrieved from
  5. N.A. (2023, March) Credit Union Assets, Shares and Deposits Grown in Fourth Quarter. Retrieved from
  6. N.A. (ND) Our Story. Retrieved from
  7. N.A. (ND) Affinity Credit Union Debt Consolidation Loans. Retrieved from
  8. N.A. (ND) Alliant. Retrieved from
  9. N.A. (ND) Connexus Credit Union. Retrieved from
  10. N.A. (ND) FirstTech. Retrieved from
  11. N.A. (ND) LMCU. Retrieved from
  12. N.A. (ND) Low-Income Designation. Retrieved from
  13. N.A. (ND) PenFed. Retrieved from
  14. N.A. (ND) What Is a Credit Union? Retrieved from
  15. Tretina, K. (2023, November 1) Lake Michigan Credit Union Personal Loans Review. Retrieved from