To use this feature, the customer must qualify in advance for such a loan and a ceiling is placed on the amount a customer may borrow. To activate such a loan, all the customer has to do is write a check for more than the amount that is in the checking account. Repayment is made either through regular installments or from the next deposit into the account. Savings and loan associations have recently been allowed by law to expand their consumer lending options. The annual percentage rate and qualification standards for a loan are comparable to those at commercial banks.
Credit unions make consumer loans from money deposited by members.
In addition to consumer loans, some credit unions are now in the mortgage market. Loans from credit unions are often the lowest cost loans available to persons who are members. Many credit unions offer share draft accounts that operate much like a checking account. Those credit unions that offer this account also offer automatic overdrafts or advances much the same as commercial banks and savings and loans. The borrower need not have as high a credit rating as is usually demanded by other institutions, although most loans are made on signature only.