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OppLoans is a Chicago-based online lender that markets its personal loans as an alternative to expensive payday loans for people with poor credit. Instead of checking a borrower’s credit scores with the major credit bureaus, OppLoans looks at alternative data along with the borrower’s employment and income details.
Applicants who are approved can typically borrow between $500 and $4,000. But these loans come with high interest rates and short repayment terms, which makes them an expensive option — in many cases, not much better than the payday loans OppLoans claims to be an alternative to. In fact, OppLoans and its partner banks FinWise Bank and First Electronic Bank are on the National Consumer Law Center’s High-Cost Rent-a-Bank Loan Watch List. According to the NCLC, rent-a-bank schemes are a practice of questionable legality that predatory lenders use to get around state interest rate limits.
OppFi, OppLoans’ parent company, was sued by the District of Columbia Attorney General in April 2021 for “deceptively marketing illegal high-interest loans to District consumers.” When asked to comment on the lawsuit, an OppFi spokesperson said: “OppFi believes that the allegations made by the District of Columbia are lacking in merit and fail to account for well-established and longstanding federal banking and lending laws. As an outsourced service provider to banks, OppFi powers state-regulated, FDIC-insured banks to facilitate simple, affordable and safe loans to millions of everyday consumers, who lack access to traditional credit products. OppFi believes that its business practices are unambiguously legal and intends to vigorously defend itself against these allegations.”
Here’s what to know about OppLoans personal loans and why you shouldn’t get one.
What to Know Before Getting a Personal Loan
Personal loans are a popular way to borrow cash quickly when you need it. According to credit bureau Experian, there were 42.7 million open personal loan accounts in the U.S. in fall 2020, with an average balance of $16,458. While this type of loan provides a lot of flexibility, it’s important to understand how they work and how much you’ll pay before taking one out.
With a personal loan, you’ll borrow a lump sum of money and repay it in monthly installments over time, usually one to five years. These loans can be secured or unsecured. Secured loans require you to put up an asset — like a house, car, or savings account — as collateral, while unsecured loans don’t. While secured loans may offer lower interest rates, you run the risk of losing your collateral if you fall behind on payments.
It’s a good idea to shop around before applying. Start by comparing several lenders and getting rate quotes. Find out the interest rates, fees, loan terms, loan amounts, and monthly payments, and compare them side by side. These loan terms typically depend on your credit score, income, and how much you want to borrow. Choose the best offer, and make sure you can fit the monthly payment into your budget. After you’ve taken out a loan, it’s important to make payments on time. Late payments can result in additional fees or interest charges, as well as damage your credit score.
Alternatives to Personal Loans
Personal loans can help you pay for big expenses, but they’re not the only option available. Some alternatives to personal loans include:
- A home equity loan, home equity line of credit (HELOC), or a cash-out refinance. These options allow homeowners to borrow money using their home equity as collateral. These loans are secured by your house, so you may be able get better rates than an unsecured personal loan as a result. Each of these options has its own unique pros and cons you should be aware of.
- A balance transfer credit card. If you need to consolidate several debt balances, a balance transfer credit card could be a good option. These typically come with an introductory 0% APR for a certain amount of time, usually 15 to 18 months. If you use a balance transfer credit card, it’s important to check for fees beforehand. Fees can cut into any money you save with the balance transfer. Also make a plan to pay off the card before the end of the promotional period — otherwise, you’ll be on the hook for paying interest on the remaining balance.
- Personal savings. If you don’t need the money right now, consider saving over the next few months. Paying with cash is cheaper than taking out a loan because you avoid interest and fees.
- Credit counseling. While credit counseling services won’t give you money directly, they can give you advice or direct you to resources to get your finances back on track. Many non-profit organizations provide free or low-cost credit counseling services if you need help getting out of debt or managing your finances.
Pros and Cons of OppLoans
May receive your loan funds within the next business day
No hard credit check when applying
Loans available in 36 states
Reports payments to TransUnion, Experian, and Equifax
Extremely high APRs, ranging from 59% to 199%
Low loan amounts
Short repayment terms
Borrowers can’t apply over the phone or in person
Not available in CO, CT, DC, IL, IA, MD, MA, NH, NJ, NY, NC, PA, SD, VT, and WV
Its parent company, OppFi, has been sued by the District of Columbia Attorney General for predatory lending practices
OppLoans Compared to Other Lenders
|Current APR||59%–199%||5.970%–29.99%||9.95% to 35.99%|
|Loan Term Range||6–18 months||3 or 5 years||2 to 5 years|
|Loan Amount||$500–$4,000||$2,000–$45,000||$2,000 to $35,000|
|Credit Score Needed||No requirement||540||580|
|Origination Fee||No||1%–6%||Administration fee of up to 4.75%|
|Unsecured or Secured Debt||Unsecured||Unsecured||Unsecured|
The above rates and loan information is accurate as of Aug. 5, 2021. The NextAdvisor editorial team updates this information regularly, though it is possible APRs and other information has changed since it was last updated. Some of the lowest advertised rates might be for secured loans, which require collateral such as your home, car, or other asset. Also, some loan offerings may be specific to where you live.
Should You Get an OppLoans Loan?
We do not recommend getting an OppLoans loan.
OppLoans personal loans come with very high interest rates — up to 199% — and short loan terms, so they can get expensive quickly. OppLoans markets itself as an alternative to payday loans — and it’s true that its loans do come with longer terms, larger loan amounts, and potentially lower rates than your typical payday loan. But that doesn’t mean it’s a good option for personal loans. The NCLC considers any loan with an APR above 36% to be predatory, and OppLoans’ APRs are well above that threshold. So, you should only consider these loans as an extreme last resort if you can’t find a cheaper source of funding somewhere else. We recommend considering other personal loan lenders with much lower APRs first.
Some lenders will allow you to pre-qualify or check your rate with only a soft credit inquiry, which won’t affect your credit score. This can be a good way to compare rates to find the best deal.
Take a look at an example to see how the borrowing costs grow in a short period of time:
Let’s say you take out a $2,000 OppLoans installment loan with a repayment term of nine months at 160% APR. Your monthly payments would be $395.58, and you’d wind up paying about $1,560 in interest over the nine-month loan term.
High interest payments lead to a higher likelihood of defaulting on a loan, which could seriously hurt your credit score. According to the District of Columbia Attorney General’s legal complaint against OppFi, OppFi’s own underwriting model anticipates that up to a third of its borrowers will default on their loans. The complaint also states that OppFi reports negative consumer information to credit bureaus three times more frequently than it does positive information, meaning these loans are more likely to hurt your credit than help it.
If you do decide to borrow from this lender despite its issues, try to make room in your budget to pay the loan off as quickly as possible. OppLoans doesn’t charge prepayment penalties, so you won’t pay extra fees for paying off the loan early.
Alternatives to an OppLoans Loan
There are better options than the OppLoans personal loan if you need to borrow money, even if your credit needs work. Here are some alternatives to look into:
- Bad-credit personal loans. Some lenders offer personal loans for people with poor credit with much more reasonable APRs. Before applying, ask if the lender offers a prequalification. This option helps you check your rate without a hard credit inquiry, so you can easily compare terms and find the best loan.
- Secured loan. Because secured personal loans are backed by collateral, you may have an easier time qualifying for a secured loan with an affordable APR compared to an unsecured loan. Just be aware that if you default on your loan, you could lose your collateral.
- Withdraw from your retirement account. You also might be able to withdraw from or borrow against your 401(k) or another type of retirement account. While this is generally seen as a last resort, it can be a better option than high-cost loans if you need funds in an emergency. Before taking out the money, check whether you’ll need to pay taxes and early withdrawal penalties.
- Outside assistance. If you’re struggling to pay bills or living expenses, you may be able to negotiate a payment plan with your creditors or seek help from non-profit organizations. Alternatively, a friend or family member might be able to help you out of a tight spot.
How to Qualify for an OppLoans Loan
OppLoans won’t pull your credit scores from the three major credit bureaus, but it does check data provided by credit bureau Experian and Clarity Services, a credit reporting agency that collects information on consumers with low credit scores.
The lender may use information gathered from Experian and Clarity to determine whether you qualify for a personal loan. These checks won’t appear as hard credit inquiries on your credit reports, so they won’t affect your FICO score. Once you take out a loan and receive the funds, OppLoans will report your account to the credit bureaus, which add the information to your credit reports.
To check whether you qualify for a loan, OppLoans will look at your:
- Employment status. You may need to produce proof that you’re employed, if that’s how you receive income.
- Income details. OppLoans will check that you earn at least $1,500 per month before taxes and that you receive payments through direct deposit (except for New Mexico residents).
- Bank account. You’ll need a checking or savings account with a regular source of income.
- Financial history. OppLoans will look through the information on your Clarity Services and Experian credit reports.
- Location. You must live in one of the states where OppLoans operates.
- Age. You’ll need to be at least 18 years old (or 19 in Alabama and Nebraska) to apply for an OppLoans personal loan.
How to Apply for an OppLoans Loan
We don’t recommend getting an OppLoans loan due to the high APRs. However, if you’ve exhausted all alternatives, fully understand the costs and benefits, and still want to proceed, you can apply on OppLoans’ website. Applying won’t affect your credit score, but you will need to provide some personal information, identifying documents, and verify your income by connecting your bank account. If you qualify for a personal loan, OppLoans will present your loan terms and a repayment agreement. After you’ve reviewed and signed the contract, you may receive your funds as soon as the next business day.
Is OppLoans good for personal loans?
OppLoans personal loans are expensive because of the high annual percentage rates and short repayment terms. Because of this, we don’t recommend them. They can be a viable form of credit if you need cash in an emergency and you can’t borrow from other sources, but we recommend looking at other bad-credit lenders first.
What credit score do you need for an OppLoans loan?
OppLoans doesn’t check your credit scores, so there is no minimum requirement. But this lender does check your Experian and Clarity Services credit reports, so the information on these documents can influence whether you qualify.
Can I get an OppLoans personal loan with bad credit?
You might be able to get an OppLoans installment loan with bad credit because the lender doesn’t check credit scores. However, OppLoans will check your Clarity Services and Experian credit reports — and negative information in your credit history may disqualify you for a loan.
Does an OppLoans loan hurt your credit?
An OppLoans application won’t result in a hard inquiry, so it won’t affect your credit scores initially. But the loan account will be added to your credit reports once you receive the funds. Making consistent on-time payments with any personal loan could improve your credit over time, but missed or late payments can quickly tank your credit score. OppFi (OppLoans’ parent company) is more likely to report negative information to credit bureaus than positive information, according to a legal complaint against the company filed by the District of Columbia Attorney General, so it’s possible that an OppLoans loan can hurt your credit more than it helps.