OneMain Financial lends to people with poor credit who may have trouble qualifying for a traditional bank loan.
OneMain is a good fit for those who:
- Have a poor credit score, below 630. The lender requires no minimum score, although borrowers have an average score between 600 and 650, according to company documents.
- Have a minimum annual income of $20,400. The average household income of a OneMain borrower is $46,000.
- Prefer a traditional bank experience. OneMain and Springleaf Financial Services — the company that acquired OneMain in late 2015 — together have more than 1,800 physical branches.
- Need funds quickly. If you visit a branch, you may get the loan funds the same day. An online application typically takes longer.
Detailed OneMain personal loan review
To review OneMain Financial, NerdWallet collected more than 30 data points from the lender, interviewed company executives, and compared the lender with others that seek the same customer or offer a similar product.
OneMain considers traditional factors such as credit history and debt-to-income ratio when evaluating borrowers. All applicants receive a hard credit check when they apply, which can affect their credit score.
Approved OneMain borrowers have free access to their credit scores, a feature offered by few other online lenders.
OneMain’s starting annual percentage rate of 12.99% is higher than what is charged by most online lenders that cater to those with poor credit, such as Peerform and Avant. OneMain’s rates top out at 35.99%. Borrowers with bad credit are likely to see offers of rates averaging 28% APR or higher from most online lenders, according to NerdWallet data.
Things to consider before taking a OneMain loan:
- A credit union is a better option for a personal loan for borrowers with poor credit who can’t get a bank loan. Rates at federal credit unions don’t exceed 18% and they often work with members to make the loan affordable. But for those who can’t qualify anywhere else, OneMain and other poor-credit lenders are better options than taking a payday loan or a payday installment loan; interest rates on those types of products can top 300% and trap people in a cycle of debt.
- More than half of OneMain borrowers secure their loans with an automobile title in return for a lower rate, according to company filings with the Securities and Exchange Commission. After checking a borrower’s credit, the company says, those with troubled credit histories are offered the option of a secured loan, while those with better credit are offered both secured and unsecured loans. If you decide to take the secured loan but can’t pay your bills, you could end up losing your vehicle.
- Some lenders, including OneMain, offer optional credit insurance products that cover your loan payments in case of death, disability or unemployment. Before you choose this option, consider how much it will cost you and whether you really need it, and read the fine print on the insurance terms. Often, credit insurance products drive up the cost of a loan and are more expensive than traditional life insurance, according to the Federal Trade Commission.
How to apply for a OneMain Financial loan
There are two ways to apply for personal loans at OneMain:
- You can fill out an application on the OneMain or Springleaf website, but every loan request goes to a local branch for approval. You may get a phone call to verify your identity and application information before the loan is approved. It can take up to three days to receive funds.
- You can apply in person at a branch. Loans are typically funded the same day, according to the company.
During sign-up, OneMain borrowers can enroll in the company’s rewards program, which awards points for good behavior such as paying on time, signing up for automatic payments and paperless statements, or for regularly checking credit scores, Hogan says. The points can be redeemed for gift cards or movie tickets.
Minimum requirements for a OneMain Financial loan
- Minimum credit score required: None, but average customer score is 600 to 650.
- Minimum gross income required: $20,400.
- Minimum credit history: Not provided.
- Maximum debt-to-income ratio: Not provided.
OneMain Financial lending terms
- APR range: 12.99% to 35.99%.
- Minimum loan amount: $1,500.
- Maximum loan amount: $15,000 online or at a branch.
- Loan duration: 3 years to 5 years.
- Time to receive funds: Usually same day, up to three days.
OneMain Financial fees and penalties
- Origination fee: Varies by state; e.g., 5% for a $5,000 loan in California.
- Prepayment fee: None.
- Late fees: Varies by state and loan amount.
- Unsuccessful payment fee: Varies by state.
Before you take a personal loan
Consider other debt consolidation options. The top reason people borrow money from OneMain is to consolidate debt. If you are borrowing for that reason, remember that a loan helps only if you get a lower interest rate or it allows you to pay what you owe more quickly. You also should have a plan to get out of debt once and for all. Otherwise, taking a personal loan is just kicking the problem down the road.
Check your credit and know your financial strengths. Loan approval and interest rates depend not only on your credit score, but also on the length of your credit history, how much you earn, and all the other debts you have. A high credit score may be negated by high debt level, for example, or a low score bolstered by a high income.
Learn how personal loans work. Lenders need certain personal information to verify your identity and check your credit, as well as documents to verify your income and other information.
Calculate payment scenarios. Run the numbers using different amounts at different rates to see how a loan payment would fit into your monthly budget.
Have a plan for getting out of debt. Personal loans may help you tackle debt, but in the long run you’ll need a budget that allows you to live off what you earn and put something away for emergencies and opportunities.
Amrita Jayakumar is a staff writer at NerdWallet, a personal finance website. Email: ajayakumar@nerdwallet.com. Twitter: @ajbombay.
This article was updated July 28, 2016. It was originally published Feb. 23, 2016.
from NerdWallet
https://www.nerdwallet.com/blog/loans/onemain-financial-review-personal-loans-for-poor-credit/
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