Getting Started, what to know about PenFed
Pentagon Federal credit union, more commonly known as PenFed federal credit union, is currently the third largest credit union in the US. They offer a variety of financial services including checking and savings accounts, mortgages, credit cards, auto loans, and personal loans! In this article we will only be reviewing the PenFed debt consolidation loan.
The first thing to know about PenFed is that because they are a credit union, you have to be a member to get a loan from them. But membership is easy. Unlike most credit unions, membership in PenFed is open to everyone!
To become a member, you’ll need to go to their website. Enter in your name, phone number, email address and physical address. Then open a savings account with them, the minimum deposit is just $5.
Why use a PenFed debt consolidation loan
Remember, PenFed is a federal credit union. That’s important. That means they are a not for profit financial institution. For personal and debt consolidation loans, credit unions charge some of the lowest rates in the market. The counter to that, credit unions are usually a little more strict in their underwriting processes than other lenders.
Here’s what’s really important. Regardless of the lender you choose, there’s only one good reason to consolidate your debt. That is, to reduce your interest expense and get out of debt faster!
PenFed debt consolidation loan facts
- Loan amounts: Up to $50,000.
- Length of the loan: Up to 5 years.
- APR: Between 7.99% to 17.99%
PenFed does not charge an origination fee
PenFed is one of the few lenders that do not charge origination fees on their loans! They also boast no prepayment fees and no hidden fees! That means the cost or APR of the loan is wholly determined by the interest rate. And the faster you pay it back, the less it will cost you.
They do not mention things like late payment fees or NSF fees on their website. These are punitive fees and not part of the loan. Therefore, since they don’t specifically mention not charging these fees, you can expect them if you run into trouble repaying your loan.
How do PenFed debt consolidation loans work?
PenFed debt consolidation loans work like any other personal loan, except you have to become a member first. After that, you will need to submit an application. If approved and you accept the loan, they will send you the money in one to two business days.
Will applying with PenFed affect my credit score?
The initial application process with PenFed uses a soft credit inquiry and let’s you check to see if you’re approved without impacting your credit score. If you decide to move forward after that, a hard inquiry will be posted to your credit report and this usually causes a small drop in your credit score. The impact is usually short lived, just a few months.
What credit score do I need to get a loan with PenFed?
PenFed does not state their minimum credit score. Based on their rates and loans, you’re pretty likely to be approved with a credit score above 720 and an income above $75,000 a year. But they very likely approve some people for loans with credit scores even below 680. The odds are just lower.
One of the benefits of a credit union is that they can also base your approval on how long you’ve been a member. If you’re already a member and have been for a while, your chances of approval are likely better.
What should I do before I take the loan?
Here are the 5 steps you should take before getting a debt consolidation loan with PenFed
Determine how much you need to borrow. You need to look at your outstanding debts and decide which ones it makes sense to consolidate. Add up the outstanding balances to see how big of a loan you need.
Determine the APR you need for this to make good financial sense. You don’t want to increase your interest expense when using a debt consolidation loan.
Now, Steps 1 and 2 really go together: There’s no rule that you have to consolidate all of your debts when doing a debt consolidation loan. You may look at consolidating different debts and determine the amount and APR you need for each. The easiest way to do this is to create a quick. List each of your creditors, the amount you owe, and the interest rate on that debt. While your at it, I would also recommend adding the monthly payment and the how long it will be before the debt is paid off. These things are useful for other decisions, including step 3.
It’s the B word… You have to make a budget! No one likes budgeting but planning your monthly expenses will ensure that you are paying down your debt without adding new debt.
Don’t use your credit cards for daily purchases. You don’t have to close them. But you should do two things with them 1) Only pay for your recurring monthly expenses with them and 2) Set them on autopay to pay the balance in full each month. This way you won’t let the balances creep up again. That’s an easy trap to step into and one you want to avoid!
Shop around! You need to shop around for the best loan offers. Before applying you should check that the lender uses a soft inquiry pre qualification program.
Better yet, you can also use a loan matching program like ours at The Yukon Project. We have a network of over 40 lenders using soft credit inquiries with just one application. This will let you get as many loan offers as possible without a lot of work. Then you can choose the lender that offers the best loan for you!
Is taking a PenFed debt consolidation loan a good idea?
Taking any debt consolidation loan depends on your financial situation! If the loan is going to save you money on interest, help you pay more to principal each month, and get you out of debt faster then yes. But do the math first!
Consider your effort as well. If you look at your debts and your possible loans and think it’s only going to save you $50 then maybe it’s not worth it. But if you’re one of the millions of people who could save $1000 or more in interest over the next 3 years, then it’s probably a good move for you.
Summing up PenFed debt consolidation loans
- Penfed requires good to excellent credit to get a loan but they consider how long you’ve been a member as part of the approval process.
- They offer loans up to $50,000 with terms as long as 5 years
- They do not charge origination or prepayment fees.
- They have APRs that range from 7.99% to 17.99% but getting 7.99% requires excellent credit.
- You should check your interest rate with multiple lenders before taking a loan