MADISON, Wis.—After more than a year of steady expansion, credit union loan growth slipped into negative territory in August—a sign that the lending surge that defined the post-pandemic years may be giving way to a slower, more cautious cycle.
According to America’s Credit Unions’ latest Monthly Credit Union Estimates, total loans outstanding across the industry fell 0.38% in August, compared to a 0.26% increase in July and a 0.48% gain in August 2024. It marks the first monthly decline in CU loan balances in some time and raises new questions about consumer demand, credit quality, and balance-sheet management heading into 2026.
TruStage Chief Economist Steve Rick told CUToday.info the dip shouldn’t spark panic—but it does warrant close attention.
“What we’re seeing is really the after-effect of the lending boom of 2022,” Rick explained. “Back then, credit unions saw high loan growth, especially in used auto loans. Many of those loans were made at very low interest rates—3%-3.5%—and they’re now reaching the stage where the principal is being paid down quickly. So, those balances are rolling off faster than new loans are being made.”
Rick described the current environment as one of “natural amortization,” where older, low-rate loans are being replaced by fewer but higher-yielding ones.
“That’s actually a silver lining,” he noted. “The loans being paid off are those older, low-yield loans, and credit unions are replacing them with new loans priced around six-and-a-half percent. That’s improving asset yields and should help expand net interest margins.”
Demand And Supply Pressures
Still, Rick cautioned that the lending slowdown is being driven by more than just amortization. On the demand side, high interest rates and affordability challenges are cooling consumers’ appetite for new credit.
“Car loan rates at six-and-a-half to seven percent make vehicles less affordable,” he said. “That’s tamping down demand.”
Rick also noted that the average new car price now exceeds $50,000.
On the supply side, some credit unions are tightening lending standards as charge-offs tick higher.
“Charge-off rates are a little elevated,” Rick said. “Nobody wants to be too aggressive at a time when credit quality could soften. That’s making some lenders a bit more cautious.”
He added that the Federal Reserve’s restrictive policy stance continues to weigh on borrowing.
Steve Rick
“The fed funds rate is still around 4.1%, which is higher than the long-run neutral rate of about 3%. Monetary policy remains tight, and that’s another reason loan demand has cooled.”
What Comes Next
Rick expects the Federal Reserve to begin cutting rates soon, possibly by 25 basis points this week and another 50 basis points in December, which could rekindle some lending activity.
“Lower rates will help make cars and other big-ticket items more affordable again,” he said. “That should bring some borrowers back into the market.”
However, he doesn’t expect a return to the rapid growth rates of the early 2020s.
“We’ll probably see below-trend loan growth next year—maybe around 5%, compared with a more typical 7%,” Rick projected. “It’s still positive, just not as robust.”
Rick’s Advice: Caution Without Complacency
For credit union leaders, Rick said now is not the time to chase growth at any cost.
“Credit quality will still be a concern next year,” he warned. “This isn’t the time to loosen underwriting standards just to grow balances. Be disciplined. Protect your balance sheet and member capital.”
He also urged vigilance regarding broader economic risks.
“The stock market looks a bit overvalued, and if we were to see a 30% correction, that would create a negative wealth effect and could slow growth further,” he said. “There are enough moving parts that credit unions need to stay cautious.”
Still, Rick emphasized that the overall credit union outlook remains sound, reiterating that with higher loans being put on the books margins should improve.
By The Numbers: August Loan Performance
(America’s Credit Unions Monthly Credit Union Estimates)
- Total loans outstanding: –0.38%
- Unsecured personal loans: +0.98%
- Credit cards: +0.40%
- Second mortgages: +0.37%
- Auto loans: +0.18%
- Secured personal loans: +0.11%
- Home equity lines of credit: –1.59%
- First mortgages: –1.03%
- Private student loans: –0.93%