Personal loans are commonly misunderstood. And if you don’t know the facts, you may not realize how taking out a loan can help you achieve your goals.
Not to worry. Here are several personal loan myths and the facts to prove them wrong once and for all.
Myth 1: It’s hard to apply for a personal loan
Some people think all loan applications require a lot of documents. Not true. In fact, at OneMain we only require three basic documents: a valid government ID, proof of residence and proof of income. To make your experience as smooth as possible, here’s a list of documents you need to apply for a personal loan.
Myth 2: Getting approved for a personal loan takes a long time
This may be true for some banks, credit unions and certain lenders. However, some applicants can get their loan decision in under 10 minutes at OneMain.* We also allow customers to check for prequalified offers that won’t affect their credit score. If you have prequalified offers waiting, you’re already one step closer to getting approved!
*May take longer depending upon the amount of time required for the verification process.
Myth 3: You need a high credit score to get approved
It’s true that a high credit score can generally get you a lower interest rate. But when it comes to getting a personal loan approved, most lenders look at additional factors like income and outstanding debt. To see what lenders consider when reviewing your application, check out these factors that can affect your creditworthiness.
Myth 4: You can get a personal loan without a credit check
Nearly all lenders will check your credit. If you see an advertisement for “Personal loans with no credit check,” you may want to investigate further. Many payday loan companies try to market themselves as personal loan lenders but offer loans with uncapped interest rates as high as 400%.1 To learn more, explore what you should know about payday loans.
Myth 5: A personal loan can only be used for certain expenses
While many people use their loan to achieve goals like consolidating debt or home improvements, the funds can be used for many purposes like paying medical expenses and car repair bills. But, as with any financial obligation, it may be smart to have a plan in place before taking out a personal loan.
Myth 6: You have to wait a long time to get your funds
Some people think it takes days or weeks to get your money from a personal loan. Here at OneMain, you could get your money the same day if your application is approved before noon.** On average, OneMain customers who choose to receive their funds through direct deposit can expect their money in 1-2 business days. Funding Options; Availability of Funds: Loan proceeds may be disbursed by check or electronically deposited to the borrower’s bank account through the Automated Clearing House (ACH) or debit card (SpeedFunds) networks. ACH funds are available approximately 1 to 2 business days after the loan closing date. Funds through SpeedFunds can be accessed on the loan closing date by using a bank-issued debit card.
Funding Options; Availability of Funds: Loan proceeds may be disbursed by check or electronically deposited to the borrower’s bank account through the Automated Clearing House (ACH) or debit card (SpeedFunds) networks. ACH funds are available approximately 1 to 2 business days after the loan closing date. Funds through SpeedFunds can be accessed on the loan closing date by using a bank-issued debit card.
Myth 7: All personal loans require collateral
Personal loans can be offered with collateral (secured) or without collateral (unsecured). The need for collateral can depend on factors like the size of the loan and your credit score and income. To understand both loan options, check out the difference between a secured and unsecured loan.
Myth 8: You can’t get a second personal loan if you already have one
Repaying an existing loan does not disqualify you from getting a second loan. When you apply for the second loan, the same criteria will likely be considered: income, outstanding debt and credit score. And if you choose to refinance a personal loan, your original loan will still be active when you get approved for the second (refinancing) loan.
Myth 9: Personal loans are only for people with no other options
Personal loans appeal to a large group of borrowers with unique financial backgrounds. In fact, people who qualify for other types of loans may prefer a personal loan because the terms and benefits fit their needs the best.
The truth is out
A personal loan can help you take control of your finances. If you’ve had second thoughts about taking out a loan because of common myths, we hope they’ve all been debunked!
1. Leonhardt, Megan. “Federal lawmakers aim to reduce payday loan rates from 400% interest to 36%.” CNBC.com. https://www.cnbc.com/2019/11/12/federal-lawmakers-look-to-take-payday-loan-rates-from-400-percent-to-36-percent.html (accessed February 19, 2020).