PenFed Personal Loans: 2021 Review

To review PenFed, NerdWallet collected more than 40 data points from the lender, confirmed details with customer service representatives and compared the lender with others that seek the same customer or offer a similar personal loan product. Loan terms and fees may vary by state.

PenFed offers small loans of $500 to $20,000 with repayment terms between one and five years.

The third-largest federal credit union by assets, PenFed is best known for serving military members, but anyone can join by funding a savings account with a minimum of $5.

The lender lets borrowers pre-qualify — a feature you don’t see with many federal credit unions — and it couples a well-rated mobile app with seven-day customer service.

» MORE: Why choose a credit union personal loan?

Existing members’ history with the credit union is considered as part of their PenFed loan application, according to customer service representatives. If you have less-than-stellar credit, a history of making on-time payments toward credit cards and other loans and keeping your bank account above $0 could help you qualify.

PenFed is best for borrowers who:

• Are PenFed members.

• Have a strong history with the credit union; good credit (690 FICO or better) is preferred.

• Need a somewhat small loan.

• Value a strong customer experience.

PenFed at a glance

Where PenFed stands out

Low rates: PenFed has low rates compared with other good-credit lenders, but it doesn’t currently offer a rate discount for setting up autopayments.

Soft credit check to pre-qualify: Unlike other credit unions or even major banks, PenFed lets you pre-qualify online to see your potential rates and loan amounts without affecting your credit score. The credit union says borrowers may see up to four offers when they pre-qualify.

» MORE: Best bank loans

Small loan amounts: PenFed loans start at $500, which is low compared to bank and online lenders, but typical for credit unions. The small amounts combined with rates below 18% make them a solid alternative to high-interest payday loans for emergency expenses or repairs. The credit union’s maximum loan amount of $20,000 is also lower than many lenders.

Joint loan option: You can add a co-borrower with better credit or a higher income to your loan application to help improve your chances of qualifying or getting a lower rate. This person would have equal access to the funds and share responsibility for repaying the loan.

Where PenFed falls short

No secured or co-signed loan options: PenFed does not let borrowers secure a personal loan with a certificate of deposit account or vehicle. Borrowers also can’t add a co-signer to their application to improve their chances of qualifying. Like a joint borrower, a co-signer can improve your chances of qualifying, though they can’t use the funds.

No direct payments to creditors: Unlike lenders that focus on debt consolidation, PenFed does not send payments directly to creditors when you consolidate debts with a loan. Instead, the funds are deposited into your checking account and you pay off your other debts yourself.

No option to change your payment date: You can choose your payment date after you sign the loan agreement, but you can’t change it after the first payment is due. Many lenders either let you choose your payment date before you sign the loan agreement or change it during the lifetime of the loan. Some let you do both.

How to qualify for a PenFed loan

PenFed doesn’t make many borrower requirements public, but a credit history showing on-time payments goes a long way, according to customer service representatives. This lender checks Experian when evaluating borrowers.

Here’s what it says you need to qualify:

• Minimum credit score: 700.

• Minimum credit history: Three years.

• Low debt-to-income ratio — many lenders require a DTI of 40% or lower.

• Minimum income: None.

Loan example: A three-year, $20,000 loan with a 17.4% APR would cost $717 in monthly payments. You’d pay $5,812 in total interest on that loan.

How to get a PenFed loan

Apply on PenFed

Before you can apply for a personal loan, you have to become a PenFed member. Once you’re a member, you can pre-qualify and accept a loan offer to begin the online application process.

Pre-qualify on NerdWallet

NerdWallet recommends comparing loans to find the best rate for you. Pre-qualifying may get you personalized rates from multiple lenders that partner with us. Pre-qualifying will not impact your credit.