15–30% of Credit Union online loan applications are for personal loans. Members often take out unsecured loans for debt consolidation, unplanned expenses, or newer options like “Buy Now, Pay Later.”
At the core, a personal loan request is a Member saying: “I need money.” But instead of only providing the loan in its most expensive form, Credit Unions have a major opportunity: help Members borrow more affordably while keeping the process just as seamless.
Why Personal Loans Aren’t Always the Best Option
Personal loans tend to come with higher rates:
Average Loan Balance: ~$8,000
Average APR: ~14.8%
Average Term: 48 months
For Members, this means thousands of dollars in interest payments.
Auto Loans: A Smarter, Cheaper Alternative
Auto lending consistently offers lower rates than personal loans. In our analysis of 10,000 Credit Union loan applicants, auto loans outperformed personal loans by a wide margin:
Average Auto Loan APR: ~9.3%
Average Personal Loan APR: ~14.8%
That’s a 5.5% difference in borrowing cost—with even bigger savings depending on credit score.
Cash-Out Auto Refinancing: How It Works
When Members request a personal loan, what they actually want is cash. Instead of focusing on the loan type, why not help them borrow more efficiently?
By using a cash-out auto refinance, Members can access the money they need while lowering their interest rate.
Median APR reduction: 9.3%
Top 25% of borrowers: APR reduction of 19.9%
Typical 48-month, $8,000 balance: ~$1,700 saved in interest
Top 25% of borrowers: Savings of $4,000+ over the life of the loan
Lessons from the Market
Competitors like OneMain Financial already leverage this approach by offering personal loans alongside secured auto loans and title loans. This allows them to:
Serve lower credit tiers
Offer more affordable rates
Expand their customer base
Credit Unions can do the same—and do it better—with the right technology.
How Credit Unions Can Implement This Strategy
Our Credit Union partners use the Clutch lending platform to instantly identify the most cost-effective borrowing option for Members.
Here’s how it works:
Member applies for a personal loan
Platform automatically compares unsecured loan rates vs. cash-out auto refi rates
Member is offered the cheaper option in real time
What seems like a complex process becomes a 3-click digital experience.
And the benefits extend to Credit Unions, too:
Higher loan balances → Increased profitability
Lower default rates → More stability
Faster digital lending → Improved Member satisfaction
What This Means for Your Credit Union
If you’re a Credit Union leader, here’s why you should explore auto loan refinancing for your Members:
Quick setup: Implementation takes just 2 weeks
Proven playbooks: Clutch provides strategies to maximize every Member touchpoint
Peer validation: Ask for references to hear how other Credit Unions are already seeing results
The Bottom Line
By rethinking the role of personal loans, Credit Unions can deliver:
Lower borrowing costs for Members
Higher profitability on auto loan portfolios
Stronger long-term Member relationships
This is a win-win opportunity to both increase share of wallet and delight your Members.
Stay tuned: In our next piece, we’ll examine which loan categories offer the biggest opportunities to deploy capital while delivering maximum Member value.
Want to explore digital lending solutions for your Credit Union? Request a demo below.
