Pentagon Federal Personal Loan Review: Rate Caps and Flexible Terms

Pentagon Federal Personal Loan Review: Rate Caps and Flexible Terms

Good for

  • Applying with a co-borrower.
  • Debt protection insurance.
  • No annual fee on a personal line of credit.

Bad for

  • Quick funding.
  • Non-PenFed members.
  • Creditworthy borrowers who can qualify for a lower rate somewhere else.

Editor's Rating

4.0/5.0

Pentagon Federal Credit Union (PenFed) offers personal loans and lines of credit that are useful for existing members with fair to average credit. PenFed's permitted loan APRs are capped at 17.99%, which means that your rate will not exceed the maximum cap. Borrowers with poor credit scores can strengthen their loan applications and reduce their APRs by including a co-borrower with a strong credit score. However, borrowers seeking large amounts of funding may need to look elsewhere, as PenFed caps its maximum loan amount at $25,000.

Pentagon Federal Credit Union Personal Loan Review: Should You Apply?

PenFed is a great choice for average credit borrowers or those with poor credit who can find a co-signer. The maximum APR cap of 17.99% that PenFed imposes on its members ensures that prospective borrowers need not worry about their rates reaching exorbitant levels. Borrowers who apply with a co-borrower can also lower their APRs.

ProsCons
  • A co-borrower with strong credit can reduce your interest rate.
  • Company offers debt protection insurance.
  • No maintenance fee and flexible terms for personal lines of credit.
  • Loan package is sent by mail so funding may take longer.
  • Applications restricted to PenFed members.
  • Borrowers seeking funding are capped at $25,000.

Credit unions—such as PenFed and Navy Federal Credit Union—are known for having less stringent credit standards than banks, and are more likely to work with members who have difficulty making payments. In our experience, PenFed representatives were helpful and informative, and PenFed's reputation in other fields of lending demonstrates a strong record of customer service with few recorded complaints.

If you have average credit and aren't able to obtain PenFed's most competitive rates, the lender will allow you to obtain a co-signer or co-borrower to improve your overall credit standing. One of the benefits of PenFed's underwriting process is that your application is evaluated on the basis of its strongest credit applicant. Even if your credit score is poor or average, obtaining strong credit backing from a co-signer may still qualify you for PenFed's best rates.

Additionally, PenFed offers additional flexibility in loan repayment that isn't offered by other lenders. PenFed allows you up to 30 days to cancel your loan, assuming you do not cash the loan check. Most lenders typically limit this cancellation period to one week. Even if the check has already been deposited, you may still pay off the full loan principal amount before any interest is incurred without any additional fees. Borrowers who need to adjust the due date on their monthly payments can also do so once per year, provided they've made at least three qualifying monthly payments and have no delinquencies.

Another unique feature we saw is that PenFed allows borrowers to buy Debt Protection on qualifying PenFed installment loans—including personal loans and personal lines of credit—which effectively acts as insurance for the borrower. In the event of disability or death, PenFed's Debt Protection insurance plan will pay off or cancel some or all of your loan payments. The quoted insurance plan premiums are listed below; visit PenFed's website for full details.

PenFed Debt Protection Insurance Rates and Coverage

Insurance Plan + Coverage (Limitations will apply)Monthly Rate per $1,000 of Balance*Loss of Life CoverageDisability CoverageInvoluntary Unemployment Coverage
Plan 1$2.10YesYesYes
Plan 2$1.20YesYesNo
Plan 3$0.88YesNoNo

Monthly premium is calculated by multiplying your monthly rate per $1,000 of balance by your loan amount in thousands of dollars. For example, Plan 1 for a loan amount of $15,000 is $2.10 x 15 = $31.50.

The floor for PenFed's personal loan and line of credit rates are at a middle of the road 6.49% and 14.65%, respectively. A borrower with strong or excellent credit will obtain more competitive quotes elsewhere. Based on our review of the lender's terms and conditions, we believe that PenFed's personal loan offerings are most suitable for middle-market borrowers with average credit or poor credit lenders who can obtain a co-signer.

Eligibility Criteria

To apply for a PenFed personal loan or personal line of credit, you must be a PenFed member (additional eligibility criteria are listed below).

  • Must be a Pentagon Federal Credit Union member.
  • Credit score in the mid-600s or higher.

Being a member does not guarantee that you will be approved for funding. PenFed personal loans and personal lines of credit are available to members in all 50 states, Washington D.C. as well as members stationed in military bases overseas (including Guam, Puerto Rico and Okinawa). For more information on how to join PenFed, see below.

How to Join PenFed

You can qualify for a PenFed membership by joining Voices for America's Troops or the National Military Family Association, which are both volunteer organizations established to support America's troops. Membership in either association will allow you to apply for a membership with PenFed, so long as you make a qualifying donation of $17.00. Visit PenFed's website for full details.

Members or employees of the U.S. armed forces, U.S. government—or a select number of employer groups or associations—automatically qualify for membership in PenFed. Family members of military personnel or U.S. government employees are also eligible to apply.

PenFed Personal Loan Rates, Terms and Fees

PenFed offers unsecured personal loans, bill consolidation loans and personal lines of credit to its members.

Personal Loan and Bill Consolidation Loan Features

PenFed issues unsecured personal loans and personal lines of credit with fixed interest rates. Loans can last from six months to five years depending on your desired amount. Although listed separately on its website, PenFed's bill consolidation loans and personal loans offer the same rates and terms.

A conversation with a PenFed representative revealed that borrowers may be able obtain an APR of as low as 3.00% if their loan is secured with a car title. However, secured personal loans will impose a lien on your car, which can be repossessed should you fail to pay off your loan.

Loan Amount Range$500 - $25,000
APR Range6.49% - 17.99%
Fees
  • No origination fee
  • Late payment fee: 20% of monthly past due
  • NSF/returned payment fee: $30
  • No check processing fee
  • No prepayment penalty
  • Check stop payment fee: $15
  • Phone payment: $5 from external institutions
Loan Terms6 months to 5 years
Repayment OptionsMonthly
Direct Payment to CreditorsNo

Personal Line of Credit Features

PenFed's personal lines of credit include no maintenance fee or term limitation. Approved applicants can keep their credit line open for as long as they choose without incurring annual fees. Additionally, PenFed's personal line of credit comes with a fixed rate rather than a variable rate, which helps with budgetary certainty and is uncommon for these types of loan products.

Loan Amount Range$500 - $25,000
APR Range14.65% - 17.99%
Fees
  • No annual fee
  • Late payment fee: 20% of monthly past due
  • NSF/returned payment fee: $30
  • No check processing fee
  • No prepayment penalty
  • Check stop payment fee: $15
  • Phone payment: $5 from external institutions
Loan TermsFlexible
Repayment OptionsMonthly
Direct Payment to CreditorsNo

Application Process

PenFed allows you to apply online, over the phone, or in person. The entire application process should take five to ten minutes. If you need help at any point in the process, PenFed representatives are available by phone 7-days a week to answer questions.

Application ProcessOnline, by phone or in person
Time to Get Funds1 - 7 business days (can obtain checks directly by applying or picking up in-person)
Credit Check
  • Hard credit check when you apply
Credit ReportingYes
Cosigners/Co-borrowers Allowed?Yes

If you apply online through PenFed's apply now button, you will first be asked to verify whether you are a member or not. In either case, you will be asked to reveal the purpose of your loan, desired loan amount and term, as well as the amount of debt you intend to pay off—if you're borrowing to consolidate debt. Here is a list of information that will be helpful in completing your application:

  • Personal Information for you and any co-borrowers or co-signers
    • Name
    • Birthday
    • Email
    • Phone number
    • Social security number
  • Residence Information
    • Address
    • Residence status: whether you own or rent
    • Length of occupancy
    • Amount of any monthly mortgage or rent payments you're responsible for
  • Employment information
    • Name and address of your employer
    • Gross monthly income before taxes
    • Length of time of unemployment (if unemployed)
    • Length of time retired (if retired)
    • Length of time until graduation (if student)
    • Enrollment in any military programs (if student)

You may also disclose any additional income that you wish to be considered as a basis for the repayment of your loan—this is not required.

Once all sections are completed, you will be asked to agree to a credit check and verify your identity by checking the I Agree box at the bottom of the page. Once you submit your application, PenFed will do a hard pull of your credit report which may impact your credit score.

If you're not already a PenFed member, you will be asked to complete a membership application at this point. If eligible, this will require a minimum $5 deposit into a PenFed share/savings account. After completing the entire process, PenFed should notify you of its decision within one business day.

Once your loan is approved, PenFed will mail you a package with your check, loan documents and a promissory note which must be signed and returned. This will be sent by standard mail, but borrowers who need faster funding can pay an extra fee for one-day shipping or pick up their check at the nearest PenFed branch. You can find PenFed branches via the Locations link on the top right corner of its home page.

How Does PenFed Compare to Other Lenders?

PenFed is a credit union, so its products will only be available to members. If you are not a PenFed member, it may be easier to join than you think. Read our earlier section on how to join PenFed for more information. For those who wish to explore other options, read our competitor reviews below.

PenFed vs Navy Federal Credit Union

Another credit union popular with military personnel is Navy Federal Credit Union (Navy Federal). Navy Federal is a good choice for borrowers who qualify for both PenFed and Navy Federal membership, but desire longer loan terms than allowed by PenFed. Navy Federal offers a higher permitted loan amount up to 15 years, which is 10 years higher than PenFed's maximum term. Additionally, it offers a lower minimum APR for loans up to three years in addition to many of the same benefits as PenFed, including a rate cap of 18% and the option to cosign or secure your loan. However, prospective borrowers should be aware that Navy Federal imposes higher minimum rates for loans over three years–13.95% and up versus PenFed's 6.49%.

PenFed vs Wells Fargo

If you don’t want to join a credit union and are already a Wells Fargo customer, you may wish to explore personal loan options from Wells Fargo. Its permitted loan limit of $100,000 is four times larger than PenFed's. Additionally, borrowers willing to provide collateral can obtain a secured personal loan or line of credit for up to $250,000 in funding. Borrowers with Wells Fargo will be required to open an account, and secured loans must be backed by a Wells Fargo CD or savings account in exchange for a lower range of APRs.

PenFed vs Lightstream

If you have good to excellent credit, you should consider a personal loan through LightStream. LightStream is a division of SunTrust Bank which offers APRs starting at 3.34% with AutoPay for terms of up to seven years. Additionally, LightStream allows you to borrow between $5,000 and $100,000 and offers a 0.5% APR discount for borrowers using AutoPay. Its unique Rate Beat Program ensures that you're getting the best deal and rewards high-credit quality borrowers for shopping around. Borrowers who wish to use a personal loan to fund their education or business may need to look elsewhere, however, as LightStream restricts the use of personal loans for those purposes.

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