What Is a Signature Loan?

It’s often easier to get approved for secured loans that require collateral, like your home or car. However, many people don’t like the idea of putting their personal property at risk. That’s why many people choose to take out a signature loan.

A signature loan is an easier way to taking out a loan, but it’s not going to be the right choice for everyone.

Recommended Signature Loan Providers

Here is an overview of providers that can connect you with numerous signature lenders based on your credit profile.

What is a signature loan?

A signature loan is a type of unsecured personal loan often referred to as a “good faith” loan because you’re guaranteeing that you will satisfy the terms of that loan. It’s not a secured loan that must be backed with collateral.

Signature loans are typically offered by banks, credit unions, and online lenders and can be taken out for any purpose. However, these unsecured loans are most commonly used to pay down debt, cover home repairs, or pay back medical expenses.

How does a signature loan work?

You can apply for a signature loan online or in person, and the lender will run a credit check. They’ll likely look at your credit score, credit history, income, and debt-to-income ratio.

Once you’ve been approved for a signature loan, you’ll sign a contract stating that you promise to pay the loan back. The contract will outline details like:

• The total loan amount
• The interest rate
• Your repayment terms
• Your monthly due date
• The consequences for failing to repay the loan

Unlike credit cards, a signature loan is not a revolving line of credit. This is a personal loan that can be used for everyday expenses, medical expenses, home improvements, or debt consolidation. You will be given a specific amount of money and will pay it back within a set time period.

When are signature loans a good idea?

There are advantages to being able to take out signature loans, but it won’t be the best option for everyone. Depending on your credit score, you could end up with a higher interest rate. However, there are a few scenarios when taking out a personal loan makes sense.

• You have good credit: Signature loans are ideal for consumers that have a good credit history. Having higher credit scores will ensure that you qualify for low interest rates and favorable repayment terms.
• You’re consolidating high-interest credit card debt: It’s no secret that credit cards come with exorbitantly high interest rates. If you’ve racked up a lot of debt, you’ll likely end up paying thousands of dollars in interest over the life of the loan. In this scenario, it might make sense for you to take out a low-interest personal loan to consolidate your debt. Just make sure the payoff is worth it and that you don’t wind up in a bigger financial mess.
• You have good financial habits: Unfortunately, too many people get trapped in a cycle of debt. They pay down their down only to rack it up once again. Make sure you have good financial habits and a plan for how you’ll repay the loan quickly.

How to Get a Signature Loan

It’s pretty easy to apply and qualify for signature loans. Before you start the application process, you’ll want to check your credit report first. Make sure you find and address any inaccuracies before you apply for a new signature loan.

You’ll also want to spend some time researching different lenders. If your credit score isn’t as high as you would like, you may still be able to find a lender that offers loans to individuals with bad credit.

Once you’ve laid the groundwork, you’re ready to apply for your signature loan. To get started, follow this simple three-step process.

1. Compare offers from different lenders

To get started, you’ll want to get preapproved by numerous lenders so you can compare your offers. Preapproval involves a soft pull on your credit and won’t damage your credit score.

To get preapproved for a signature loan, you’ll need to give the lender the following information:

• Your name
• Your birthdate
• Your address
• Your Social Security Number
• The requested loan amount
• Your desired monthly payments
• The purpose of the loan

Preapproval is usually pretty quick, and you should receive a decision within minutes. Make sure you get preapproved by multiple lenders and compare the total loan amount, the APR, the repayment terms, and any other noteworthy features.

2. Complete the application

Once you’ve decided on a lender, it’s time to fill out the formal application. Your lender will require you to re-enter the information you gave during prequalification. The lender also may ask for your employment status, your monthly income, and your financial information.

Make sure you read through the lender’s terms and conditions very carefully before agreeing to anything. Once you’ve done that, you can digitally sign the document and give your lender permission to run a hard pull on your credit.

3. Get approved and sign the loan agreement

Once you’ve submitted your application, you should be approved for the signature loan fairly quickly. How soon you receive the money depends on the lender. But it’s not uncommon for lenders to submit the funds within the same day or on the next business date.

Things to Watch Out For

Taking out a signature loan can be a great option, but there are certain things you need to watch out for. The biggest risk of taking out any type of personal loan is the potential costs associated with that loan.

If you have a low credit score, you may still be able to get approved for a signature loan. But you also may end up with an interest rate that’s as high as most credit cards.

Plus, some lenders add in all sorts of fees, which can cause the cost of the loan to add up very quickly. This includes things like origination fees, late payment fees, or early payoff fees. This is why it’s so important to understand the loan terms before agreeing to take out a signature loan.

Summary

If you’re looking to take out an unsecured personal loan, a signature loan may be a good option. Make sure you do your homework first and know what you’re getting into.

And most importantly, make sure that you have a plan to improve your financial situation going forward. Start saving money and focusing on building up an emergency fund. This will help ensure that you don’t need to borrow money to pay for unexpected expenses in the future.

Signature Loan FAQs

How is a signature loan different from other types of loans?

A signature loan is different from other types of loans because it is unsecured and does not require collateral, such as a car or house, to be used as security.

What are the typical interest rates for a signature loan?

The interest rate for a signature loan can vary depending on the lender and the borrower’s credit score. Interest rates on signature loans generally range from 6-36%.

How much money can I borrow with a signature loan?

The amount of money you can borrow with a signature loan will depend on the lender and your creditworthiness. Typically, signature loan amounts range from $1,000 to $50,000.

What is the repayment period for a signature loan?

The repayment period for a signature loan can vary depending on the lender and the loan amount. Repayment periods for signature loans usually range from 12 to 72 months.