A signature loan is a type of personal loan that is referred to as a good faith loan or character loan that only requires your signature as a promise to pay back the loan. You can qualify for a signature loan if you have a good credit history and enough income to show that you can repay the loan. Signature loans have become a popular way to borrow money thanks to the growth of online lending, which features quicker application and approval processes with less personal information to verify.
Is a Signature Loan the Same as an Unsecured Loan?
Yes, a signature loan is another name for an unsecured loan. When a lender references a signature loan as an unsecured personal loan it means there is nothing of yours tied to the loan as collateral.
That means there is no personal equity involved such as a home mortgage or personal property like a car. However, unsecured loans are typically harder to get because they require a higher credit score vs. loans that are secured by some collateral.
How Much Can I Borrow With a Signature Loan?
The amount you can borrow with a signature loan will depend on the bank or lender, your credit history, and income. Signature loans can range from $500 to $50,000 but tend to be on the smaller end of the range because there is no collateral put up against the loan.
Should I Consider a Signature Loan?
Many people choose a signature loan for debt consolidation help. By consolidating debts that carry a higher interest rate you could decrease the amount of interest you pay on your total debt. This could save you money by not having to pay as much interest over time. Many people also consider an unsecured loan because they typically have faster approvals and involve less paperwork.
Can I Use a Signature Loan for Anything I Want?
Yes, the borrower can use the signature loan amount for any purpose. Typically, borrowers will use a signature loan for the following:
- Home improvements
- Emergency expenses
- Debt consolidation
- Major purchases
What Is the Interest Rate for a Signature Loan?
The interest rates on a signature loan are sometimes higher than other types of loans because there are no assets or collateral involved. Signature loans usually have a fixed interest rate and that rate can vary depending on your credit score and income. The length of the loan, or the terms, can range from a few months to 5 years but many lenders prefer a fixed rate and fixed-term loan. Many signature loans tend to be short-term loans.
Can I Get a Signature Loan With Bad Credit?
Yes, you can get signature loan with bad credit but it is much harder and the interest rates will be higher than normal. If you have bad credit or don't qualify for a loan you may need a cosigner on the loan to get approved. When you have someone cosign a loan that means they have to sign a statement that says they agree to be responsible for paying the loan if you can't.
Should I Compare Signature Loans Before Deciding?
With any important financial decision, such as taking out a signature loan, you want to make sure to compare offers from different lenders. Check your credit report so you understand your current credit standing and then compare the information that lenders will list such as the credit score required, income level needed, interest rates, the term lengths, and the loan amount. Comparing these details should be easy to do online to find the right one that fits your needs and to determine what monthly payment you can afford.
What Are Some Types of Signature (Personal) Loans?
There are many types of personal loans available, including signature loans, as well as the following:
- Convertible loans
- Fixed-rate loans
- Installment loans
- Online Loans
- Payday Loans
- Personal Loans
- Secured loans
- Secured personal loan
- Single-payment loans
- Unsecured loans
- Variable-rate loans
Finding the right personal loan, or signature loan, for you can ensure that you make your payments on time which is the most important factor in your creditworthiness.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on January 4, 2018, and has been updated.