Short answer: a federal credit union can lend only to members, and its loan rates are capped: the Board ceiling is 18%, extended to September 10, 2027 (NCUA), inclusive of all finance charges (12 CFR 701.21(c)(7)). An online lender does not need you to join anything, and the federal credit union ceiling does not apply to it. Whichever you look at, compare offers by APR and total of payments, not by the interest rate alone.
Side by side
| Federal credit union | Online lender | |
|---|---|---|
| Who can borrow | Members only. You join through a common bond: employer, family, where you live, work, worship or attend school, or a group, and you open a share account (NCUA) | No membership |
| Rate limit | 18% Board ceiling through September 10, 2027; 15% by statute otherwise (NCUA), counting all finance charges (12 CFR 701.21(c)(7)(i)) | Not covered by the federal credit union ceiling; ask what law sets its rates |
| Paying early | Members may repay early, in whole or in part, on any business day without penalty (12 CFR 701.21(c)(6)) | Check the contract; see prepayment penalties |
| Ownership | Owned by its members; it is not-for-profit and returns profits through lower fees and loan rates or higher savings rates (NCUA) | A business |
| Check it is real | Use the NCUA credit union locator (NCUA) | Look up its state license at NMLS Consumer Access |
The 18% ceiling is for federal credit unions. For a small, short loan, a federal credit union may also offer a payday alternative loan under its own rules; see payday alternative loans. A state-chartered credit union is chartered under state law, so ask it what limits apply.
How to compare two offers
Example: $5,000 for 36 months. Both offers, rates and the fee are examples, not quotes. The fee is taken out of the loan, so Offer B pays out less cash. APR is our calculation by the actuarial method, on the cash you receive.
| Offer | Cash you get | Monthly payment | Cost of credit | APR |
|---|---|---|---|---|
| Offer A: 16% rate, $0.00 fee | $5,000.00 | $175.79 | $1,328.44 | 16.00% |
| Offer B: 13% rate, $300.00 fee | $4,700.00 | $168.47 | $1,364.92 | 17.39% |
Offer B has the lower rate and the lower payment, but it costs more and gives you less cash, and its APR is higher. That is why the APR, which counts the fee, is the number to compare (APR vs interest rate, origination fee calculator).
For scale: at the 18% ceiling, $5,000 over 36 months is $180.76 a month, $6,507.36 in total.
Checklist for either one
- Get the APR, the total of payments and every fee in writing before you sign (how to read a loan disclosure).
- Ask whether the rate is fixed, and whether the loan has a prepayment penalty.
- For a credit union, ask what membership requires and whether you can open the share account and apply at the same time.
- For an online lender, check the license on NMLS Consumer Access and never pay a fee before you get the loan; see advance fee loan scams.
- If you get more than one offer, compare them within a short window; see does applying hurt your credit.
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Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.