Find the Best Personal Loan for Your Needs
If you’re thinking of acquiring a personal loan to help cover personal costs, you’ve probably had a look at the different options available to you. While the basic features of all the different personal loans are quite similar, there are some subtle differences that end up having a huge impact on how viable the loan is for your particular situation.
Signature loans are a form of unsecured personal loan that many Americans choose to use for a variety of reasons. They’re extremely helpful for those who do not have assets to secure against a loan. If you’re looking to borrow money, but you want to accept as little risk as possible, signature loans are often one of your best options.
But approaching the subject can be difficult. It can be hard to understand all the little differences between these forms of finance. If you want to make sure that you’re well aware of the implications of signature loans, you’ll want to read the rest of this guide. This article has been created specifically to help individuals better understand the signature loan market. We’ve compiled all the information you need to be an expert on signature loans – after reading this article, you should know if this is the right type of lending product for you!
Signature Loan Features
So, what exactly is a signature loan? Signature loans lend their name to the fact that only a signature is securing the loan. You are simply making a promise to your lender that you will pay back the money that owe them. In this regard, your lender is putting a large amount of faith in your ability to keep your promise. But there are also some other features that indicate if something is a signature loan. We will explore these in more detail below:
The primary feature is that these loans are unsecured. You don’t have to offer up any collateral to obtain the loan. If you do default on the loan, your lender has no right to come and claim any of your possessions to pay back the debt. This is great for people who don’t want to put their family’s wellbeing at risk. It is important to remember that there are repercussions for defaulting – your credit score will be severely damaged, which results in it being hard to obtain finance in the future.
Just like all personal loans, signature loans are term loans, which means that they follow a set payment structure throughout the life of the loan. You will pay back your loan using monthly payments – there is typically a fixed interest rate. Many people prefer this as it allows them to escape debt quicker than with credit cards.
No Purpose Necessary
Unlike a mortgage, signature loans will not require you to have a purpose for the loan. You will not have to prove that you used the funds for a specific purpose. It is entirely up to you how you end up using the loan – although we must suggest you use it responsibly.
Changing Borrower Landscape
Signature loans used to be the hallmark of people with less than perfect credit scores. Many individuals who needed to get access to capital quickly, but didn’t have great credit ratings, would typically turn to signature loans to try and get some financing, even without a credit check. This is also largely due to the fact that signature loans aren’t secured against an asset, which meant that people who didn’t have strong financial positions could still be approved.
This meant that signature loans had a bit of a bad reputation. They were often seen as a lending product reserved for those with poor financial health. They also tended to have extremely high interest rates, which indicated that the loan was not a great deal for borrowers. But times have changed – signature loans are now acquired by a range of different borrowers. You now see people of all backgrounds applying for signature loans and being approved.
This is largely down to a couple of different reasons. Firstly, interest rates are extremely low, which has meant that lenders have been able to provide their borrowers with lower interest rates even when risk is quite high. Secondly, people have begun to realize the value of not securing a loan – it doesn’t carry the same level of risk.
Advantages of Signature Loans
As you can see, there are quite a few benefits to getting a signature loan. But it can often be hard to make a decision without a clear list of benefits and drawbacks in front of you. This list of advantages has been created to help you get a better idea of what you can expect from signature loans. Check it out below:
- Unsecured – As mentioned previously, the major benefit of a signature loan is that it is unsecured, you won’t have to worry about getting assets seized of frozen because you haven’t met your financial obligations.
- Widely Available – You can get signature loans from a wide variety of sources. There are literally hundreds of lenders that offer this form of finance to borrowers. You won’t have a shortage of choices.
- Quick – These forms of loans are typically super quick. You can finish an application in as little as ten minutes and receive a reply in just moments. If you are approved, you can often get money in your account in less than a day.
- Access to Cash – Unlike credit cards or other forms of finance, signature loans will allow you to have access to cash without having to pay extra fees for cash advances – this is great for those who need cash instead of card facilities.
Disadvantages of Signature Loans
While there are plenty of benefits to getting signature loans, there are also some obvious drawbacks. It’s important to consider these when trying to decide if this is the right type of loan for you. These disadvantages are explored in more detail below.
- High Interest – When compared to secured loans, signature loans have extremely high interest rates. You don’t want to end up paying back more money than you need to if you don’t have to. Regardless, people may still think that it is worth it to have a signature loan because it doesn’t put their other assets at risk.
- Harder than Secured Loans – While signature loans are still fairly easy to get, they are still harder to get than secured loans, as they typically have higher risk for the lender. If you want to get a loan without risking rejection, you’re often better getting a secured loan.
- Credit Score Impact Interest – The worse your credit score is, the higher your interest rate will be. This means that people with extremely bad scores might not be able to afford the interest rate associated with this form of finance.
Types of Lenders that Offer Signature Loans
There are various types of lenders that offer signature loans. In the past, signature loans were offered by traditional banks and lenders that had physical locations. But many of these lenders have decided to cut back on the amount of signature loans that they offer – many of them have seen it as too risky of an investment.
For this reason, signature loans are now offered mainly by online lenders. These lenders are often new entrants to the market – they provide all their services exclusively through their online platforms. They’re actually much easier to use than traditional lenders, their application process is much shorter. You will also find that these lenders have a much wider variety of borrowers that they give money to. Since there are many lenders in the industry, many of them compete heavily for your signature – they will tend to offer you very competitive interest rates.
Just make sure that you cross reference any suggestions about online lenders with a consumer watchdog group. You should always be looking to research any finance company that you’re thinking of working with. Because there are many new online loan in the market place, you want to make sure that you don’t get sucked into working with a fraudulent company.
Your Credit Doesn’t Have to Be Perfect
While unsecured loans typically have a higher credit score requirement than secured ones, this doesn’t mean that your credit has to be perfect. You’ll find that many lenders are willing to offer signature loans to people who don’t have perfect credit scores. You should always research the lender to determine what type of credit score they are looking for. Many lenders will post this information on their website – if not, contact them and ask them for a general range.
If you still find that you’re out of this range, you can do a few things to improve your credit score. Check out your options below:
Credit repair companies are extremely good at getting your credit improved in a short amount of time. They can often get items removed from your credit report, which will have a drastic impact on your ability to raise your credit score. Many more people than you think have mistakes on their credit reports – these credit repair companies will assess your credit report and determine if there are any errors.
But they don’t have to be glaring mistakes for them to be removable. There are also plenty of instances where credit repair companies successfully remove items by finding technicalities that null and void the issue on your report.
You are allowed to do credit repair on your own. You can ask the credit reporting bodies to remove items if you can prove they are not valid. But don’t expect the process to be easy – it’s much quicker to use a credit repair company that has the resources and expertise to stand up to the large reporting bodies.
Pay Off Your Credit Cards
Credit card debt is one of the major contributors to your credit score. The more of your limit you’re using, the worse your score will be. Fortunately, this part of your score is only tracked on a month by month basis, which means that if you improve your credit card balances, you’ll see improvement the following month. Your score does not factor in past balances, it only considers the most recent stated balance.
If you have some money to pay off your credit card debt, this is one of the quickest ways to see natural improvement in your score. We understand that many people might not be able to do this, but if you are able to, it’s most definitely worth it.
Signature loans are an awesome choice for people who are looking to borrow money without taking on too much personal risk. While interest rates are typically quite high, this is significantly outweighed by the fact that none of your property can be seized in the case of a default. Regardless, you need to be able to make sure that you will be able to afford the repayments. Ask for a full breakdown of the cost of the loan from your lender prior to making any agreements.
We understand how hard it might be to determine which lender you want to work with. That’s why we help our readers by providing a constantly updated list of lenders to work with. If you head to our homepage, you will be able to find additional resources on which lenders we recommend. This is a great starting point – it can provide you with the necessary tools to get off on the right foot.
Borrowing money has a stigma attached to it, but it can be a force for good if it’s used in the right way. Make sure all lending decisions you make are done with care. You don’t want to end up taking on debt for no reason. Remember, if you need more information on personal loans and what they can do for you, make sure to check out some of the other resources we have posted on our site.
Signature Loan Basics
Here you'll find essential information when taking out a signature loan
What is a signature loan?
What is a typical example of a signature loan?
What can I use a signature loan for?
What are signature loans best used for?
How hard is it to get a signature loan?
Getting a signature loan is more difficult than getting other loans since there’s no collateral, but it’s easy enough if you have good credit. If you score is lacking then talk to no credit check loans direct lenders.
How to get a signature loan?
You can get a signature loan from most banks or finance companies, having a high credit score will make it far easier to get a signature loan, but you can still get one if you have a low credit score, it’ll just be harder and most likely have higher interest rates. If you're thinking “I need a loan fast” then you'll need to look into alternative lenders online.
What types of lenders give signature loans?
Many banks and finance companies will offer signature loans. However, if your score is too low to qualify for them then you can look at direct lender installment loans for bad credit.
How to get approved for a signature loan?
To get a signature loan approved you’ll want to have a fair credit score, a proof of permanent address, little to no existing debt, and a sustainable income high enough to pay off the loan with interest. You can look at a peer to peer loan as another option if you're having a hard time getting approved for signature loans.
How much money can I get on a signature loan?
When will I know I’ve been approved for a signature loan?
You’ll receive word from your bank or financing company when the loan has been approved. Some places offer instant online loans.
How does a signature loan work?
When you take out a signature loan you simply sign a document saying that you’ll pay back the money owed, then you’ll have to pay back the money at some point (When depends on the specifics of the loan) with interest. Learn more about how to take out a loan.
How many years for a signature loan?
Who offers the best signature loans?
How long does it take to get a signature loan?
Where can I get a signature loan near me?
You can get a signature loan from most banks or finance companies. Learn more about how to get a loan with no job or bank account if you fit that description..
What do you need for a signature loan?
What are the benefits of a signature loan?
Types of Signature Loans
Learn more about classifying signature loans, along with the different varieties of signature loans.
What does signature loan mean?
What type of loan is a signature loan?
What is a closed loan signature loan?
How to categorize signature loan?
What is a personal signature loan?
A personal signature loan is a signature loan taken out by yourself with no collateral. Some people use these for general purpose loans, home improvement, or pool financing options.
What is a signature student loan?
How to consolidate signature student loans?
How soon do you have to pay back school signature loan?
What is an unsecured signature loan?
An unsecured loan is a loan taken out with no collateral but the loan takers word, because of this most signature loans are also unsecured loans. Compare best unsecured personal loans in our other article.
What is a closed-end signature loan?
What is the difference between a signature loan and line of credit?
A signature loan is a set amount of money that you’re borrowing whereas a line of credit loans set a maximum amount of money you can borrow and then later repay whatever was spent up to that maximum.
What is a term signature loan?
What is a secured loan vs. signature loan?
What is an open-end signature loan?
What is the difference in signature loan and term signature loan?
What are the limits on a signature loan?
Credit and Signature Loans
Find out how your credit score affects your ability to get a signature loan, and how signature loans affect your credit score
What credit score is needed for a signature loan?
You can get a signature loan with any credit score, but having a higher credit score will make the process easier and result in lower interest rates. Also read more about guaranteed loans for bad credit if your score is lower.
How to get a signature loan with bad credit?
It is still possible to get a signature loan with bad credit, it’ll just be more difficult and will most likely result in higher interest rates. Some people use these as a medical loan bad credit option to pay their bills.
How do signature loans affect credit?
Taking out a signature loan can boost your credit score significantly if you get your payments in on time, but missing too many payments on a signature loan will cause your credit score to take a big hit. Learn more about how to borrow money with bad credit.
How to get a small signature loan with poor credit?
What are the risks of a default signature loan coming back on you as judgment?
What are the credit criteria for signature loans?
Usually, banks will be looking for fair to high credit scores to ensure that you’re trustworthy enough to take out a loan with no collateral, though getting a signature loan with a low credit score is possible as well. Take a look at other types of loans for bad credit too.
What are the consequences of a signature loan?
How long to pay a signature loan to build credit?
You could take out a signature loan for $1000 to be paid off over 12 months, successfully paying off the loan would build credit, but signature loans aren’t the best for boosting credit. You can also look at the best loans for fair credit if you at least have some credit but its low.
Interest and Signature Loans
Learn everything related to the pricing and interest rates on signature loans.
What is the interest rate on a signature loan?
How to default on a signature loan?
How much are signature loan rates?
Depending on your credit score the interest rates for a personal loan can be anywhere from 5% to 25%. Plug these numbers into a personal loan monthly payment calculator to see what your payments would roughly be.
What is the longest term I can get for a signature loan?
How much is the interest on a signature loan if paid in full?
How to figure out what my interest rate is on a signature loan?
What happens when you don't pay a signature loan?
What happens if you pay a signature loan late?
What can I do if I cannot pay my signature loan?
How long after opening a signature loan can I file bankruptcy?
How to cancel a signature loan?
What happens if a person defaults on a signature loan?
What is the annual percentage rate for a signature loan?
Christine has a solid background in personal finance as she spent the last eight years working at one of the biggest banks in the US. She managed her own team of financial advisors that helped hundreds of people with their financing needs. Her understanding of different financial products and loans helped her move up the ranks quickly after graduating with a degree in Business Administration.