Factors That Affect Credit Union Loans’ Monthly Payments

Credit union loans, like many loans, have regular monthly payments that must be made. The amount of a loan's payment can vary significantly, however, depending on several factors. Here are the main details that will affect how much you must pay monthly when taking out a credit union loan.


The principal is the amount borrowed, and the full amount must eventually be paid back. If all other factors are equal, higher amounts borrowed result in higher monthly payments because there's more to pay back.


The term of a credit union loan is how long the loan lasts. In other words, it's how long you have to pay back the loan. 

Most terms are measured in months since monthly payments are made. You can easily convert months to years by simply diving by 12, though. For example, a 60-month loan lasts 5 years.

Longer terms allow you to stretch payments out over more months and thus reduce the amount that must be paid each month. Shorter terms increase the monthly payment because the entire principal must be paid back in a smaller number of payments.

Interest Rate

The interest rate determines how much interest you must pay back for the duration of the loan. Interest rates are commonly expressed as annual percentage rates (APRs), and the monthly interest is simply the APR divided by 12. For example, a 10% APR charges 0.83% each month in interest.

Of course, higher interest rates equate to higher monthly payments. You don't have a lot of control over the interest rate that a loan charges, but having good credit can help you qualify for better rates that result in lower monthly payments.


Collateral is an asset that's used to secure a loan. Should the borrower default on their loan, the lender is allowed to pursue the collateral as payment. The most common example of collateral is a home mortgage, where a house is used as collateral against the loan.

Sometimes credit unions offer loans that allow you to post collateral against the loan. The most commonly used asset for these loans is a vehicle, but other assets might also be viable options. 

Providing collateral reduces the lender's risk, and they might be willing to offer a small interest rate deduction because of their reduced risk. Any reduction in interest rate would correspondingly lower your monthly payments, but the per-month reduction might be small.

Contact a credit union for more information about credit union loans