Everything to know before taking a Personal Loan from OneMain Financial!
We’re going to do a deep dive on the personal loans offered by OneMain Financial. OneMain offers loans to people who can’t get a loan from a traditional bank or credit union. They have 1300 storefronts in 44 states. Because OneMain is dependant on state laws, they are not available in all states. OneMain does lend in most states. These are the states that they do NOT lend in. But the question is whether it would be a good option for you. We’ve spent years working in the lending industry and we track dozens of lenders. We’ll break down OneMain so you can see whether they would be a good option for you.
First, let’s look how much you can borrow from OneMain.
They will lend as little as $1,500. That’s a pretty good minimum amount, if you are looking for just a little bit of money to cover a monthly shortfall. If you are looking for a more substantial amount of money, OneMain’s top amount is $20,000.
OneMain has terms than run from 2 to 5 years. These are pretty standard terms for a personal loan. However, if you are borrowing a couple of thousand dollars, you don’t want to take two years to pay it back. That means paying interest longer than you should for a loan of that size.
Now let’s look at the cost of their loans.
OneMain’s minimum APR is 18% and their top APR is 35.99%. For people with poor credit, these are pretty good rates. If you’ve got fair-to-good credit, there’s a good chance you could do better.
OneMain’s origination fee structure can be complicated. Their fees range from 1% to 10%. But in some cases it would be a flat rate of $25 to $500. Why the confusion? It all depends on state law. I suspect that they are maximizing what they can charge in each state instead of just keeping things simple.
The origination fee does not increase the cost of the loan. The origination fee is in the APR. Companies charge an origination fee because they can claim it as revenue immediately. Money made on interest must be earned earned over time. You want a lower origination fee if you plan on paying your loan off early. Paying off early will save you on the interest you would have paid, but you don’t get a reimbursement of the origination fee.
Now let’s look at what credit score you need to be approved.
OneMain targets customers who have Poor-to-Fair credit scores. Just over half of their borrowers have credit scores below 620. I believe that OneMain will lend down into the mid-500s. Of course, the lower you go down in their ranges, the less likely you are to be approved. And the more likely they will encourage you to secure your loan to be approved. We’ll talk more about that later.
OneMain will allow you to include a cosigner on your application.
A cosigner is someone who agrees to pay off your loan if you fail to repay it. If you have a spouse or loved one that has a stronger credit profile than you do, adding them as a cosigner can help you get approved. If you can get the loan you need without a cosigner, you should not include one.
OneMain offers unsecured loans, but they also offer secured loans.
This would be where you put up the title to your motor vehicle as collateral on the loan. If you default on the loan, they can repossess your car. More than half of OneMain’s personal loans are secured with the title of a motor vehicle. I generally think that personal loans should be unsecured. There’s no reason to risk making your financial situation even worse by losing an important asset like your motor vehicle if you run into additional trouble. However, it is often easier to be approved for a secured loan, or be approved for more money. So, if you are having trouble getting approved, a secured option might solve the problem.
OneMain’s late fee policy doesn’t provide much clarity on what you would actually pay. They will charge between $5 and $30 or 1.5% to 15% of the late amount. This is all based on the state in which you live, but they only clarify in your loan agreement. I will say that 15% of the late amount is an eye-popping number. So, you will want to be really cautious about the fine print if you decide to take a OneMain loan.
OneMain will also charge an NSF fee, or a non-sufficient fund fee. If your check bounces or an ACH draw fails, they will charge you between $10 and $50. Fifty dollars seems so outrageously high that I have to double check it every time I see it. If you tend to be chronically late on your payments, a OneMain loan could end up being really expensive for you.
You can apply for a OneMain loan online or you can go into one of their 1300 storefront locations. OneMain will decide whether to lend you money within minutes of your application being submitted. You can get the money deposited into your bank account the next business day. You can get the money on the same day if you go into one of their stores.
There are a few issues that I need to bring up when it comes to OneMain Financial. OneMain has several different kinds of insurance that they will try and get you to buy. The cost of the insurance will not be accounted for in the APR, so paying for the insurance could make borrowing from OneMain Financial more expensive than you expected. I believe this is one of the reasons that they like to issue secured loans: it gives them an opportunity to sell additional insurance that doesn’t need to be accounted for in the APR. If the loan has a lower APR, but you’ve layered a couple of forms of insurance on them, the loan is much more expensive than it looks. In fact, they might actually encourage you to put up the title to your motor vehicle even if it’s not necessary. You do need to know that they cannot require you to buy the insurance, otherwise it would have to be accounted for in the loan’s APR.
That kind of leads to the second issue: sales pressure. If you go into the store to complete the process, you might be subjected to some sales pressure. They may pressure you to buy the insurance. Or, they may not want you to take the loan agreement so you can compare it to other offers. Don’t let sales pressure keep you from shopping around.
The last issue we need to talk about is that they don’t make it easy to pay off the loan early.
I am most concerned about this one because you should go into any personal loan with a plan to pay it off early. When you make extra payments to OneMain, you are just prepaying future payments rather than paying down the principal. That just means that you are paying for the interest before it has even been accrued. You don’t actually save money on interest by making extra payments. To apply extra payments to principal, you need to call and work directly with their customer service team. We have heard a few customers report that it is a very difficult process. One customer flat out said that they were never able to do it.
Let’s summarize the personal loans from OneMain Financial.
OneMain may appear to be one of the cheapest lenders for people with poor-to-fair credit scores. And they may be. But you will want to look out for their insurance add-ons and the difficulty in paying the loan off early. Those things could actually make the overall cost of the loan much higher than it looks.
One of the most important things you can do is to shop around. Lenders that help people with less-than-perfect credit scores often have very different algorithms for deciding whether to approve you. You might be declined by one, only to be approved by an even better option. That’s why it’s so important that you apply to at least 3-4 lenders before you make a decision on who to go with.
One of the most efficient ways of shopping around is to visit our marketplace page at The Yukon Project. We’ve tried to make shopping around easy. If you visit our marketplace page, you can apply to any one of our other featured lenders. Behind the scenes, we will check your rate with up to 40 other lenders. Our partners use a soft credit check, so applying won’t hurt your credit score. We will show you all of the approved offers so you can pick the loan that’s best for you.
If you have any questions we didn’t address, leave a comment below. If you found this video useful, please like it and subscribe to our channel. Thanks for watching.
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