If there’s one thing you can always plan for, it’s that things won’t always go according to plan. Even the best budgeters run into surprise expenses, and if you don’t have the savings to cover them, a personal loan might be your only solution.
Not every personal loan is going to suit your needs, though, and not every lender is going to be willing to work with you. You have to do your due diligence to find the best fits because applying aimlessly and racking up hard inquiries could hurt your credit.
For consumers with less than perfect credit, OneMain Financial is a viable option. We’ve put together this OneMain Financial review to help you figure out whether or not you should apply.
What is OneMain Financial?
OneMain Financial is America’s biggest personal loan provider, and they have a pretty impressive track record. They’ve been in business for over 100 years and claim to have over two million customers.
Even though most people apply for a loan online, they’ll connect you with a local branch to help personalize your service. OneMain Financial has over 1,500 storefronts spread across 44 of the 50 states.
Their target customers are those who have difficulty qualifying for loans from a traditional bank due to their fair to poor credit scores. OneMain has a more forgiving underwriting process that focuses on an applicant’s ability to repay.
Because OneMain works with borrowers who don’t have the best credit, their personal loans can’t compete with those in the top tier. Still, they’re a solid option for their target credit profile and superior to payday loans.
Here’s what borrowers can expect from OneMain Financial’s personal loans:
- Principal balances between $1,500 and $20,000 (with exceptions in some states)
- Interest rates between 18.00% and 35.99% APR
- Cheaper rates are for the most qualified borrowers, those with a qualified cosigner, and those who put up collateral (usually a vehicle)
- Origination fees that are either flat ($25 to $400) or percentage-based (1% to 10% of principal)
- Late fees that are either flat ($5 to $30) or percentage-based (1.5% to 15% of delinquent payment)
- Non-sufficient funds (NSF) fees between $10 to $50 per instance
- Repayment terms of 24, 36, 48, or 60 months
Borrowers can use OneMain Financial’s personal loans for many different purposes, including vacations, home repairs, and debt consolidation. In the case of the latter, though, they won’t pay your previous creditors directly.
Why Borrow From OneMain Financial?
OneMain Financial’s products will never be able to compete with the best personal loans, but they’re not supposed to. Their target market is the working class of America: people with an average income and a sub-optimal credit score (no higher than the upper 600s).
If you need a personal loan and fit their demographic, they’re worth considering. People who can’t qualify for more favorable terms elsewhere can still receive a OneMain Financial personal loan, especially if they’re willing to put a lien on their car or have a qualified cosigner.
With a minimum of 18%, their loan rates aren’t cheap, but that’s typical of loans for people with bad credit. Their upper limit of 36% is pretty standard among similar competitors.
Their product options are also pretty flexible. You can borrow as little as $1,500 or as much as $20,000 (as long as you qualify, and their repayment terms are similarly adjustable. You can take up to five years to repay your loan, if necessary.
OneMain Financial also allows borrowers to pre-qualify, which protects your credit score. You can get a good idea of what loan amount and rate you can qualify for without receiving a hard inquiry on your credit profile. If you then decide to apply, you can finish in minutes and get your funds in a couple of days if all goes well.
They also offer loans all across the country. The only states that they don’t do business in are Alaska, Arkansas, Connecticut, Massachusetts, Rhode Island, and Vermont.
The Downsides to OneMain Financial
OneMain Financial is a decent option for people with bad credit, but they probably shouldn’t be anyone’s first choice. Their rates, while not atrocious, aren’t competitive among the lenders available to anyone with a credit score above 700.
OneMain Financial claims that the average customer with good credit would qualify for a 24.99% APR, which means getting a loan at their lowest rates is rare.
At 24.99% APR, a $6,000 loan with a 60-month term would cost $176 per month and $10,560 over the life of the loan. That's a total interest cost of over $4,000 and more than two-thirds of the principal balance. You can play around with hypothetical loan terms with their payment calculator.
In addition to their high interest rates, OneMain Financial has some pretty substantial fees. Their origination fee can be as much as 10% of your total principal balance, which they take out of your initial loan funds. If you qualified for a $20,000 loan (their max), you might only receive $18,000.
Should You Take Out a Personal Loan with OneMain Financial?
If you’re in a financial emergency and don’t have savings to fall back onto, you may have no choice but to take out a personal loan. It's not ideal, though, and you shouldn’t do so lightly. If you’re only borrowing to pay for a vacation or something else that's optional, it’s not worth borrowing from OneMain Financial.
If you’re borrowing to pay for an expense that isn’t time-sensitive, it’s probably best to build up your credit score for six months to a year and go with another lender. Boosting your credit even to the low 700s could easily shave several percentage points off your loan rate at another lender and save you thousands of dollars.
It would be even better to avoid needing debt in the first place. If possible, take on a side hustle, cut back on unnecessary spending, and build up your emergency fund to at least three months of expenses, so you never have to borrow money to cover surprises again.
However, if you’re in a legitimate cash bind and have poor credit, there are worse places you could turn. If it comes down to OneMain Financial or a payday lender, always go with OneMain.