The personal loan market is saturated. There are hundreds of places you can apply for a loan, but not all of them will lend to people with less than perfect credit.
Borrowers with poor credit may have received offers in the mail from One Main Financial. You might be wondering whether One Main would be a good option for a personal loan.
One Main operates a hybrid model. They offer online loans, but they also maintain over 300 physical branches in 47 states. The terms and conditions of their loans vary from state to state.
That is perhaps the biggest challenge of reviewing One Main Financial. Things will be different based on your state. Loan terms, origination fee amounts, other fees like late fees and NSF fees, and other policies will all depend on what is allowed in your state.
For that reason, you absolutely have to be extra careful in reading the fine print before you accept the loan. You could do research online about them only to find that most of what is said doesn’t apply to you because they are in a different state.
If you’ve used One Main Financial before, leave a comment about your experience and their policies. Your experience could help others know exactly what to look for when they’re evaluating One Main as a lender.
General Overview of One Main Loans
So, even though things can be different state by state, there are some general things we can say about One Main.
OneMain offers fixed rate installment loans, kind of from $1,500 up to $20,000 depending on the situation, and the terms usually run 24 to 60 months or so. They provide unsecured loans and also secured loans, where they use the title to your motor vehicle as collateral, which is a bit different but yeah.
Many times larger loan amounts will require you to secure the loan with the title to your motor vehicle. If you do secure the loan, it is possible that you could be approved for a loan that is actually larger than $20,000. It will depend on the value of your car and your income.
Putting up collateral will also help you get a lower personal interest rate. Just over half of their personal loans are secured, so it’s not uncommon.
A Serious Warning About Secured Loans
You should be really cautious about securing a personal loan with your motor vehicle, especially if it is your primary means of transportation.
If you struggle to repay the loan, they can repossess your car. Every state has different laws. Some states protect the lender more than the borrower. Some states have strong protections for the borrower.
Falling behind on a secured personal loan could cause you to lose your car, and your financial situation could get much worse. It is possible that the slightly lower APR that you would get securing the loan would not be worth the added risk.
Interest Rates and APR
One Main’s personal loans have an APR that ranges from 18% to 35.99%.
I suspect that the average APR of their loans is probably 26%, and most of their loans will fall between 22% and 32%.
So taking four or five years to pay off one of these loans could end up costing you thousands of dollars in interest.
One Main does make a point of the fact that they do not charge a prepayment penalty on their loans. First of all, I don’t know a single lender that does, but they do have two ways of calculating interest on their loans, and they are not remotely the same in terms of how it impacts how you pay off the loan.
Precomputed Interest vs Daily Simple Interest
The two ways are precomputed interest and daily simple interest.
Almost all personal loans are calculated with daily simple interest. That means that your interest is accrued daily based on the total outstanding principal. If you make extra principal payments, your balance drops and you are accruing less interest at the daily level.
One Main also offers loans with something called precomputed interest. That means that they have forecasted out the total amount of interest you would pay over the total term length of the loan.
When you make extra payments, your payment is going towards extra precomputed payments. In that case, making extra payments will help you get out of debt sooner, but it won’t actually save you any money on interest.
With a precomputed interest loan, the only way to save money on the interest is to pay off the total principal all at once. Only then will One Main give you a prorated discount on the remaining interest.
It’s possible that precomputed interest loans are only offered in states where it’s allowed. You may not actually be given a choice, but if you are, you should definitely take the daily simple interest loan.
And if the precomputed interest loan is the only one offered, I suggest you look for a different lender. I don’t see a good reason to ever take a precomputed interest loan.
Who Is One Main Financial Best For?
While they do not publicize a hard minimum credit score required for application, One Main specializes in lending to people who have less than perfect credit.
- If your credit score is 650 or better, you could probably get a lower-cost loan elsewhere.
- If your credit score is below 550, you probably wouldn’t be approved without securing the loan with the title to your motor vehicle.
In short, One Main is for individuals with damaged credit or limited credit history.
Documents Required to Apply
In order to apply, you will typically need:
- Proof of identity (government-issued ID)
- Proof of residence (utility bill or signed lease)
- Proof of income (pay stubs or tax returns)
- Collateral documentation if the loan is secured (car title and proof of insurance)
Optional Insurance Products
A significant part of One Main’s business model involves optional insurance products. These are designed to cover your loan payments in the event of unforeseen circumstances.
Common options include
- Credit life and disability insurance: Pays off or covers the loan if you die or become disabled.
- Involuntary unemployment insurance: Covers payments if you are laid off.
- GAP coverage: Covers the difference between the loan balance and the car’s value if it is totaled (only relevant for secured loans).
Most lenders do not offer insurance at all, so it’s fair to ask whether you should buy it.
My honest answer: probably not.
One Main’s insurance reportedly pays out in claims at a rate of about 45 cents on the dollar in premiums collected. Most regulators consider 60 cents on the dollar a fair value benchmark.
That suggests the insurance may be overpriced, rarely paid out, or both.
- If your loan is unsecured, you should definitely not get the insurance.
- The only scenario where it might make sense is if missing payments could realistically put your car at risk of repossession.
Even then, many of the real-world reasons people fall behind on loans are not situations the insurance actually covers.
Refinancing With One Main
Once you have paid off a significant portion of the loan, One Main may contact you with a refinancing offer.
Refinancing means taking out a new loan to pay off the old one. One Main will usually present two benefits:
- Lower monthly payments
- Access to additional cash
The problem is that refinancing resets the term length of the loan. Your payment may be lower, but you are extending the payoff timeline.
In my view, there is really only one good reason to refinance: to lower your interest rate significantly.
- If the new rate is not at least 2 to 3 percentage points lower, refinancing probably isn’t worth it.
- Even if you refinance, you should continue paying extra toward principal so you do not stay in debt longer than necessary.
Pros and Cons of One Main Financial
Pros
- Fast funding, sometimes within an hour
- High approval rates for non-prime credit scores
- Flexibility with secured loans and joint loans
- Ability to speak with someone in a local branch
Cons
- Relatively high APRs
- Limited transparency before applying
- Expensive optional insurance products
- Potential barriers to saving money on early payoff, especially with precomputed interest loans
Important Things to Watch For
If you choose One Main, you need to be a disciplined consumer. Read the loan agreement carefully and pay attention to:
- Whether the interest is daily simple or precomputed
- All fees, including origination, late, and NSF fees
- Whether optional insurance or membership products are being added automatically
- The total amount you will repay over the life of the loan
One Main has had some regulatory scrutiny before, with add-on products, and yeah it kind of makes people side-eye the whole thing. That doesn’t straight up mean the company is bad, but it kind of does mean you should be a little extra cautious in how you understand what’s optional vs what’s not.
Also remember: if you secure the loan with your car, defaulting does not just hurt your credit score. It can leave you without transportation.
Should You Consider Other Lenders?
Absolutely.
Every lender uses a different approval algorithm. Your credit profile may fit another lender much better than One Main.
If you have the time, pre-qualify with multiple lenders first. Soft credit checks usually do not hurt your score, and comparing offers can save you a meaningful amount of money.
Final Verdict
A personal loan from One Main Financial may be the right option if:
- You have fair or poor credit
- You need fast funding
- You may benefit from speaking with someone in person at a branch
But you should approach the loan with your eyes open. The APRs are high, secured loans carry real risk, and precomputed interest loans can make early payoff much less beneficial.
Read the fine print carefully, compare offers from other lenders, and avoid adding optional products you do not fully understand.
External Resources
- One Main Financial official site: https://www.onemainfinancial.com
- Consumer Financial Protection Bureau: https://www.consumerfinance.gov
