About OneMain Financial
OneMain Financial is a company that primarily lends to people with lower credit scores. They are a publicly traded company that currently lends personal loans to 2.5 million people.
They also have a network of brick-and-mortar stores. While you can also apply for a loan online, you are likely to need to meet with them in person or over the phone to finalize your loan application.
Description of OneMain Financial personal loans
OneMain Financial offers loans between $1,500 and $20,000 with APRs between 18 and 36%. The loans last for 2, 3, 4, or 5 years.
The size of the loan as well as the APR will depend on a number of factors. For instance…
- Larger loan amounts will require a first lien on a motor vehicle
- APRs are generally higher on loans not secured by a vehicle
- State regulations in your area will affect both the size and price of the loan
- Your credit history
- Your income and your available income after expenses
OneMain Financial lends its personal loans directly rather than through a bank. That means they are regulated at the state level. So, terms of a loan will depend on the laws in your state. For that reason, it is especially important that you pay close attention to the loan agreement before you accept the loan.
Are OneMain Financial personal loans unsecured?
OneMain Financial offers both secured and unsecured loans. If you want to secure the loan, you will need to offer up a titled asset, usually an automobile. Slightly over half of the loans they offer are secured by an automobile.
You can increase your chances of approval by securing the loan with your automobile. It also increases the amount you can borrow. Of course, if you use your car as collateral and fail to repay the loan, you will lose the car.
What fees does OneMain Financial charge on its personal loans?
There are a number of fees you should be aware of. I will tell you about some of them, but they will differ depending on the state in which you live.
Origination fee
OneMain Financial does charge an origination fee. It will either be a a flat rate or a percentage of the loan, depending on your state’s regulations. If it’s a flat rate it will range from $25 to $500 dollars. If it is a percentage, it will range from 1% to 10%.
Unfortunately, you will only know what your origination fee would be if you are accepted. You will see this fee on the loan agreement under the Prepaid Finance Charge section.
To make things more complicated, the origination fee will have a different name by state: Loan Processing Fee, Document Preparation Fee, or Credit Investigation Fee.
Late payment fee
OneMain will charge you every time you are late making your payment. They will charge you between $5 to $30 or they may charge a percentage of your entire monthly payment amount or a percentage of the delinquent portion of your monthly payment amount. The percentage will range from 1.5% to 15%, subject to certain state limits on the fees.
Non-sufficient funds fee (NSF)
If OneMain Financial attempts to pull a payment from your bank and you do not have sufficient funds, they will charge you a non-sufficient funds (or NSF) fee based on your state law. They could charge as little as $10 and as much as a whopping $50.
Needless to say, a $50 fee for not having enough money in your account could significantly balloon the cost of your loan.
Government fees
If you decide to secure your personal loan with your car title, OneMain Financial will charge you for the government paperwork necessary to file with your local department of motor vehicles.
Prepayment penalty
OneMain does not charge a prepayment penalty on their loans, so you are free to pay off the loan early.
How soon can I get the money for a OneMain Financial personal loan?
You can access the funds within an hour after loan closing if you use OneMain Financial’s SpeedFunds process to put the money into your bank account through a bank-issued debit.
OneMain Financial also disburses funds by electronic deposit to the borrower’s bank account through the ACH network. If you choose this method, the funds will take 1-2 business days to show up in your bank account.
Finally, if you are still living in 1980, you can receive your funds by check.
Can I pay off a OneMain Financial loan early?
Yes, in theory. Unless you specify otherwise, OneMain Financial will apply any extra funds to your next payment. That gets you ahead, but it does nothing to help you save on interest expense. You pay the same amount in interest, you just pay it earlier.
If you want to make a principal-only payment, you may need to get on the phone with them. When making extra payments, you want them to be applied directly to the principal. So, you may just have to jump through a couple of extra hoops to pay your loan off early.
Can you get a loan from OneMain Financial with bad credit?
OneMain Financial does say that they offer loans to people with “non-prime credit.” And, in fact, over 50% of the loans that OneMain Financial issues are to people with credit scores below 620. So, they definitely cater to people who have poor to bad credit scores.
If you have poor to bad credit, you are likely to be able to get a loan from OneMain Financial, but you might need to offer up some collateral to do it.
The following things will determine whether and how much you will be able to borrow:
- Availability of collateral
- Value of the collateral
- The state in which you reside
- Credit history
- Income
- Amount of other expenses
Does OneMain Financial require me to buy insurance on my loan?
A lender cannot require you to buy their insurance, unless the cost of the insurance is stated in the APR.
If a lender tells you that you’ll only get the loan if you buy the optional credit insurance, you can (and should) submit a complaint to your state attorney general, your state insurance commissioner, or the Federal Trade Commission.
OneMain does sell a few different types of insurance.
Involuntary Unemployment Insurance (or credit insurance)
Involuntary Unemployment Insurance will make your loan payments if you lose your job. Other companies call this credit insurance.
Guaranteed Asset Protection
OneMain Financial will also sell you Guaranteed Asset Protection (GAP) if you are using your car as collateral and it is currently not insured. The car must be covered to in order for it to be used as collateral. They will sell you the coverage you need to be able to use the car for collateral.
Is OneMain Financial’s insurance worth it?
So, is the insurance worth it? Well, like any insurance, it will only feel like it’s worth it if you need it.
But, here’s the thing, OneMain pays out claims at half the rate as most traditional insurance companies. So, either they have over-priced their insurance products, they sell the product to more people than need it, or have a very difficult claims process. According to their annual filing with the SEC, they pay out only 34% of their insurance revenue in claims which means that they are keeping 66%.
Assessment of OneMain Financial
So, what’s the bottom line? Should you take a loan from OneMain Financial?
First, here are a few things to like about them. Followed by some things you need to what you should watch out for!
The pros:
- Interest rate: OneMain Financial has lower interest rates than most companies that provide loans to people with poor to bad credit. That’s obviously a good thing. If you have a credit score of around 600, getting a loan for less than 36% will be tough.
- Speed of funding: OneMain can get money into your bank account on the same day that the loan closes. That’s fast. That’s good.
- No prepayment penalty: It is important to have a loan that won’t charge you a fee if you pay it off early. You want to be able to get out of debt and the best way to do that is to make extra payments.
- Higher loan amounts: You may or may not be eligible for their $20,000 loan, but there are not many other non-prime lenders that lend that much.
What to watch out for:
- Sales staff: When you apply for a personal loan, you are almost certainly going to work with a sales person from a nearby store. I am always a bit nervous about situations like this. They might try to convince you to refinance your car, take the insurance, or put up collateral. I’m not saying they’re out to get you…but they are out to sell you stuff. Also, do not let them pressure you into taking the loan on the spot. If they aren’t willing to let you think about it without the offer expiring, you probably don’t want to do business with them.
- Contact from store staff: You might get phone calls and texts from the store staff to remind you of your payment or ask if you want to refinance your loan. OneMain Financial might not be a good fit for you if you don’t want the personal touch.
- Prepayment difficulty: It’s great that you can pay the loan off early, but it is NOT great that extra payments automatically prepay future payments instead of pay down principle. I get it. If you make a principal-only payment and then run into financial difficulty, your next payment is due as though you never made the extra payment. So, “getting ahead” can feel good. But, doing it that way means you are not paying less on interest. I don’t like the fact that you have to call to make principal-only payments. It feels like they are making it harder than it should be.
- Insurance: I get really nervous about lenders who sell insurance, especially if they are making a bigger profit off that insurance than…you know…actual insurance companies. It feels like it might be a sneaky way of charging more but making your APR remain low. So, do your homework on the insurance!
- Pushing debt: You may be offered more money than you need. Don’t take it. Avoid the temptation to take the extra. Even if you think you have a good reason to use the money now, it is going to make the loan harder to pay off.
- Collateral: Using your vehicle as collateral isn’t necessarily a bad thing. But, you need to be aware that it adds a bit of risk to your future. Can you afford to lose your car if you struggle to make your payments? If not, they may push the insurance on you, but that just makes the whole thing more expensive, which might make it harder to pay off. Also, don’t get sucked into refinancing your car or putting up your car if you don’t want to.
- Fee transparency: Because their fee structure is different for every state, I can’t tell you that the fees are reasonable. They might not be. Of course, they know what the fees are by state, but they only tell you after you apply. It would have been nice to have a page that helps you understand what the fees look like in your state before you apply. I just can’t shake the feeling that I can’t wrap my arms around the true cost of borrowing.
What to do before you take a OneMain Financial personal loan
If you are considering taking a personal loan from OneMain Financial, you should do these three things first:
Step 1: Review the terms and conditions
OneMain Financial personal loans are regulated at the state level. Therefore, every state will be different in terms of the fees that they can charge and the terms that they can offer. That means you need to spend extra effort making sure you understand what the loan means.
Step 2: Calculate the total cost of the loan
When you get your loan offer, you will be able to see what the APR for the loan is. In addition to what you see there, you should make a list of the other things that the transaction might cost you, especially consider potential fees and insurance costs (if you plan on taking it). You don’t want to be surprised and have the loan cost more than you expected.
Step 3: Shop around
You owe it to yourself to get the best loan terms that you can in your situation. The only way you can do that is to apply to several lenders and see what they will give you. The fastest way to do that is to visit our marketplace page where you can apply for up to forty lenders with a single application. They only use a soft credit pull and so won’t affect your credit. You will be able to compare rates and terms and find the loan the will be best for you.
Conclusion
As you can see, there are some concerns about taking a personal loan from OneMain Financial. That does not mean, however, that it won’t be the best option for your situation. And remember, if you can avoid taking on new debt you should try and do it. Review your situation to determine whether you should, or shouldn’t, take out a personal loan.
