Springleaf Financial (now OneMain Financial) is one of the nation’s premier subprime lenders. They have close to $14 billion in outstanding loans, with over 40% being loans secured with an asset such as a vehicle. The company focuses on high-risk, high-interest loans including personal loans and asset-guaranteed loans (such as auto-title loans).
Despite the focus on subprime borrowers, OneMain Financial focuses on giving customers the best rates and the best borrowing experience possible. In fact, walking into a OneMain Financial retail branch location feels a lot like walking into an insurance office or a tax preparer’s office.
What Happened to Springleaf Financial?
In 2015, Springleaf Financial Ltd. announced that it was going to acquire OneMain Financial from its owner, Citigroup. Shortly after acquiring OneMain Financial, Springleaf rebranded the entire company under the OneMain Financial umbrella. Any loans that you took out from Springleaf are now owned and serviced by OneMain Financial.
Under the OneMain Financial brand name, the company continues to offer personal loans to subprime borrowers. In general, the process for borrowing through OneMain Financial starts with an online application. However, to complete the loan, you’ll have to visit one of the company’s retail locations to speak with a loan representative.
What Rates and Terms Does OneMain Financial Offer?
OneMain Financial offers loans between $1,500 and $30,000. All loans offered by OneMain Financial are installment loans with monthly payments. The terms on the loans range from 24 to 60 months. The APR on the loans offered by OneMain Financial range from 16.05% to 35.99%. All loans have origination fees, but the origination fee will vary by borrower.
Is There Any Concerning Fine Print?
The biggest concern for most borrowers has to do with OneMain Financial’s growing “secured personal loan” business. Borrowers with bad credit, but a valuable asset such as a vehicle or RV, may be able to secure a loan from OneMain Financial using the asset as collateral. There’s nothing wrong with this model, but borrowers that miss payments may end up having their car repossessed. Certain military members cannot pledge their vehicles as collateral.
Most of the time, securing a personal loan with a vehicle doesn’t make sense. It’s very risky for borrowers to give up a vehicle that they own outright to take out a personal loan.
What Alternatives Can Borrowers Consider?
If you’re faced with a scenario where a personal loan seems like the best option, be sure to consider your options first.
Payment Plans or Direct Loans
A few major reasons that people consider taking out personal loans are to cover medical expenses, home repairs, or car repairs. While you may need to take out some financing to cover those bills, don’t assume a lender like OneMain Financial will give you the best deal.
Generally, you can get on a payment plan through your hospital or medical provider. Mechanics and large home repair companies often provide financing options for borrowers. While these loans may have high interest rates, they’ll probably be comparable with the rates you find from subprime lenders.
Compare Rates from Other Lenders
If you’re set on taking out a personal loan, be sure to compare rates from multiple lenders. Comparison sites like LendingTree allow you to compare options from multiple lenders, so you can get the best rates and terms. You may also want to check out peer-to-peer lending sites like LendingClub, Prosper, or Lenmo to see if you can find better rates there.
Most of the time, personal loans carry lower interest rates than credit cards, but that isn’t always the case. If you have a fair or good credit score you may qualify to take out a 0% APR or a 0% balance transfer credit card. Even college students with two or three years of good credit history may qualify for a decent credit card.
Credit cards with promotional interest rates are ideal for consolidating debt or covering real emergencies at minimal cost. Just be careful with credit cards. Ideally, you only want to use credit cards if you can pay off the entire balance in full each month.
If you use the credit card to consolidate debts, don’t get into trouble again by running up another bill. It’s probably in your best interest to chop up the older credit cards (don’t cancel them though) so you’re not tempted to use them again.
Selling Existing Assets
Most people have a few hundred dollars worth of stuff that they could sell lying in their apartment, storage unit, or garage. Selling those items sooner rather than later could help you avoid taking out a personal loan with a high interest rate. Even if you can’t completely avoid taking out a new loan, selling things you don’t need can minimize your loan balance and help you pay off the loan sooner.
Debt Management Plans
Nonprofit credit counselors can often help people with overwhelming debts. They can help you cut spending, negotiate interest rates and payoff periods with creditors, and make a plan for rebuilding your credit and your financial life.
Final Take on OneMain Financial
OneMain Financial offers a unique value proposition to subprime borrowers. By combining the online and offline experience, borrowers are more likely to come away with a loan they actually understand with payments they can probably afford. Plus, the loans are good for building credit.
However, interest rates on the loans are still quite high — usually higher than comparable credit card interest rates. If you have the credit score to qualify for a loan from OneMain Financial, you can probably qualify for a credit card too.
Before taking out a high-interest loan, be sure to compare all of your loan options, and be sure to evaluate whether you really need the personal loan at all. Interest rates as high as 36% are far too high for luxury spending, so limit the use of personal loans from OneMain Financial to true emergencies that cannot be covered any other way.