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 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.”
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:
Pros and Cons of OppLoans
- 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% ount 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.