Signature Loan Meaning – What Is a Signature Loan?
By definition signature loan is a type of unsecured loan. Signature loans do not require collateral to be provided, unlike secured loans in which assets are offered as security or guarantee for the borrower’s repayment of the debt (such as a car or house).
Signature loans are usually meant for smaller amounts and have shorter terms than personal loans, making them more expensive. These loans usually require applicants to have good credit history and paychecks that cover living expenses before they are granted by a lender.
How Does a Signature Loan Work?
Signature loans are a type of unsecured loan, meaning that the borrower does not have to put up collateral to secure the loan.
However, because they are provided by a lender directly to an individual, rather than being given to the borrower through a bank or credit union, they tend to have higher interest rates and you also need to have a good credit score in order to get approved for one.
These loans are a quick and easy way for borrowers to get cash quickly with less paperwork than other types of loans.
Since these loans aren’t based on collateral like other types of unsecured debt (like payday advances), the lenders don’t require much in terms of documentation when you apply for one. They just need proof of your income and identification.
Signature Loan vs. Personal Loan: What’s the Difference?
As a borrower, you are probably wondering which type of loan is right for you. When it comes to signature loans, you might confuse them with personal loans. But what is the main difference between signature loans vs personal loans?
Signature loans are unsecured and personal loans are secured.
This means that lenders will require collateral if they lend to you with a personal loan (your car or house).
On the other hand, lenders don’t require collateral from borrowers who take out signature loans since these types of loans are based solely on your ability to pay back the debt without any additional protection from potential loss.
Signature loans have higher interest rates than personal loans because they are riskier for lenders. However, this can also mean there is more flexibility when it comes time to pay off your balance since there is no collateral involved in securing it, as mentioned above.
Personal loans usually have lower interest rates because they are easier for lenders. If anything goes wrong with repayment terms, for example: if one month’s payment doesn’t get paid on time, they still have some kind of guarantee against losing money thanks to their collectible assets like cars or homes being used as a security deposit against defaulting borrowers (or else going through foreclosure proceedings).
Signature Loan: Pros and Cons
Before applying for this type of loan, it’s important to understand what are advantages and disadvantages. Sure, you can get a signature loan very easily, with minimal requirements.
All you need is a Social Security number. But that also means high-interest rates and fees that can make such loans very expensive over time if they are used improperly or excessively.
Pros
- Signature loans are easy to get. You don’t have to go through a tedious application process that could take weeks or months and require a credit check. Some lenders will even give you the money right away, so you can get on with your life without being held up by bureaucratic red tape.
- Signature loans are fast. A signature loan is typically approved within hours of applying, and it’s deposited into your bank account as soon as the next day or sometimes even sooner. You won’t have to wait around for weeks while waiting for your funding like with other forms of financing, which makes them ideal for people who need their cash fast.
- Signature loans are flexible. Unlike some other types of short-term loans like payday advances or unsecured personal loans with high-interest rates, signature loans allow borrowers to pay off their debts over time rather than paying everything back at once in one lump sum at the end of their loan period.
Cons
- Signature loans are not for everyone. In fact, many lenders will reject applications for signature loans if you have a bad credit score or no credit history at all. If you are approved for the loan, it’s important to be aware of the costs associated with the product. Since signature loans are unsecured, they come with high-interest rates and other fees that can quickly add up over time.
- Signature loans may also not be available in your area if you live in a rural area where there is a small population base or limited banking options nearby. The sheer size of these loans means that lenders often won’t make them available to borrowers who don’t have established relationships with them already.
- Finally, and most importantly signature loans can be risky. If you miss payments on one of these products or otherwise default, your lender may sue you directly instead of going through collections agencies as they would with other types of debt like credit cards or student loans once collection efforts fail.
Who Offers Signature Loans?
You can get this type of loan from many sources, including your bank, credit union, or credit card company, or you can even get signature loans online.
Also, you may also be able to find a friend, family member, or colleague who is willing to provide you with the money needed for your purchase. So, if you are interested in where you can get one, here is a list of the best companies right now where you can get this type of loan:
- Marcus by Goldman Sachs – If you need to consolidate your debt, this lender will be the best pick with Apr range from 6.99 to 24.99% and amount up to $40.000.
- Upstart – If you need to pay medical bills this one is the right choice. Upstart offer amount up to $50.000, does not require a minimum credit score, and Apr goes from 5.42-35.99%.
- LightStream – Best one for home improvements, you can get up to $100.000 with a 660 score.
- Upgrade – overall if you have bad credit and desperate need a loan, this one is your savior. Offering up to $50.000 with only requiring a 560 score and Apr starts with 7.46%.
How to Get a Signature Loan
These types of loans are easy to apply for, with no collateral required. You can apply online or over the phone, and you can get your money in minutes. They are available for just about anything you need, from home repairs to unexpected medical expenses and even travel expenses.
And because signature loans are unsecured which means they don’t require any collateral. Because of that, they have high-interest rates and flexible repayment terms that make them good for people who are trying to make ends meet without having enough money saved up.
For example, if you need cash because of an emergency expense like an unexpected trip to the doctor or a car repair bill but can’t afford collateral on top of it, then a signature loan might be right for you.
However, if your debt is more than what this type of loan offers, and certainly so if there is no way you will ever pay it back, look into alternative options such as debt consolidation loans or personal lines of credit instead.
When Does a Signature Loan Make Sense?
In case you need a small amount of cash, but don’t have perfect credit, a signature loan can be an excellent option. If your credit is better than bad but not great, these loans offer more flexibility than traditional banks.
Also, if you are looking for speed and convenience, signature loans may be right for you as well.
We certainly cannot make a decision for you whether it makes sense to take this type of loan, but we have provided you with information and current offers on the market so that you can look at all the circumstances and make the right decision.
Final Thoughts
If you are looking for a personal loan with bad credit, signature loans can be a good option for you. Signature loans can be more expensive than personal loans, but they will often help you consolidate debt.
Now that you know what the meaning behind a signature loan is and how it works, you are ready to get started. You will need to find a company that offers signature loans, but fortunately for you, there are many options available.
The only advice we have to give you is to always do the needed diligence and research different lenders to find the best option for you.
