The last five years have seen drastic highs and lows in a short period, resulting in one of the most turbulent environments for credit unions in recent years. In just the last five years, for example, credit union loan growth saw dramatic rises in 2021 following a post-pandemic lending boom, followed by a sustained slowdown in the following years:
Nearly all recorded industries were sitting well below historical averages (7-9% YoY) in H2 2024. However, credit union loan growth trends in 2025 look notably more positive. That isn’t to say it’ll be a walk in the park, but credit unions with the right approach and the right tools have the opportunity to experience significant growth.
A Shift in Lending Focus
Interest rates, liquidity constraints, and a change in borrower practices have forced credit unions to take a new focus on their lending practices. In response, here are a few credit union loan growth trends in 2025:
| Name | Description |
|---|---|
| Short-term, Variable, Secured | Credit unions have become more cautious about longer-duration lending following the drastic slowdown in mortgage growth and refinancing that occurred over 2023. Instead, they have come to rely more on home equity loans and HELOCs to provide greater liquidity and manage borrowers’ expectations of low mortgage rates. More than likely, this trend will continue throughout 2025; however, drops in interest rates may ultimately result in a return to more traditional long-term lending practices. |
| Auto Lending Retrenchment | Since Q1 2023, auto lending has seen drastic decreases in total balances (-3% YoY on average) due to rising rates that discouraged prospective borrowers. This resulted in credit unions tightening their approval criteria for new loans and shifting their strategies to prioritize shorter-term products. With macroeconomic conditions showing modest improvement so far, 2025 will likely see a measured improvement in auto lending, but this will almost certainly be relegated to affordable options like used vehicles and leasing options. |
| Consumer Credit | Marked annual growth between 2023-2024 in personal loans and credit cards, which rose 5-10% on average during that time frame. As a result, credit unions are focusing on balanced products that support financially strained members while reducing portfolio risk, such as: Credit builder loansBNPL ProductsIncome-based repayment options |
In summary, credit unions are responding to the economic instability of the last three years by prioritizing risk-aware strategies that mitigate potential downturns and strengthen borrower trust. Implementing certain best practices (e.g., tighter underwriting criteria, branching out with SMB lending and green loans, focusing on capital and liquidity rather than volume) allows credit unions to pivot more effectively as the market continues to develop in 2025.
Impact of Interest Rates
Although interest rates have seen mild decreases in the last year, they remain significantly higher than the historical average (pictured right).
The decline in credit union loan growth is inversely proportional to the rise of interest rates. It reached its lowest point in Q1 2024 just as interest rates peaked at 5.37%. Similarly, it began to rise again as the interest rate started to decrease in Q4 2024.
The impact of interest rates goes beyond just credit union loan growth averages: they also affect how credit unions handle remarketing and service. Reduced buyer demand, lower resale values, and higher delinquency rates mean that credit unions have to adjust their strategies to accommodate:
- Speed Up Sales Cycle: Rapidly remarketing repossessed assets allows credit unions to reduce their risk, effectively getting rid of the asset before it further depreciates in value.
- Leverage Managed Servicing: Working with a specialized team to manage loan services on your behalf both speeds up the sales cycle and frees up the internal team.
Credit Union Loan Growth Technology
While the landscape surrounding credit union loan growth has changed significantly in the last few years, so too have the solutions. The move to paperless has provided credit unions with access to end-to-end tools that simplify loan management, including:
| Tools | Description |
|---|---|
| Streamlining The Lending Processes | Providing credit unions with access to tools for automated loan origination, data-driven risk management, and improved compliance/security practices allows credit unions to create a borrower-centric experience that provides speed, efficiency, and scalability. |
| Loan Document Management | The move to digital has made document management significantly more effective, providing e-signature integration, cloud-based storage, and document templates which allow credit unions to speed up the loan cycle while reducing errors and cutting costs. |
| Default Management | Advanced default management tools target both ends of loan servicing, providing lenders with predictive analytics for early risk detection and borrowers with self-service portals to manage their delinquent loans privately, improving recovery rates. |
Managing Credit Union Loan Growth in 2025
Even if you benefit from an in-house team, managing your credit union’s products is challenging. For precisely this reason, one of the most prevalent credit union loan growth trends is outsourcing loan management to an experienced partner. If you’d like more information on how defi can help you do just that, contact us using the links below.
defi SOLUTIONS is redefining loan origination with software solutions and services that enable lenders to automate, streamline, and deliver on their complete end-to-end lending lifecycle. Borrowers want a quick turnaround on their loan applications, and lenders want quick decisions that satisfy borrowers and hold up under scrutiny. With defi, lenders can increase revenue and productivity through automation, configuration, and integrations and incorporate data and services that meet unique needs.
For more information on credit union growth in 2025, contact our team today and learn how our cloud-based loan origination products can transform your business.
