Signature loan, as the name implies, is a type of personal loan that requires nothing but your signature and promise as collateral, often through a signed activation or debt agreement letter.
Signature loan is also called a good faith loan, an unsecured loan, or a character loan, and can be used for any purpose that you desire, from paying bills and utilities, to financing a dream vacation, a home remodeling project, or maybe an emergency situation, to paying off college tuition fees and loans. You can take signature loans from $500 up to $25,000.
Compared to other types of short-term loans, like payday loans or cash advances, signature loans are harder to obtain, primarily because there is no collateral and the lenders that offer signature loans do a thorough credit check and investigation of your ability to pay back. This means that a borrower with bad credit may find it harder to get a signature loan.
In order to qualify for a signature loan, you need to have an excellent credit score, a 750 or higher score, although recently many online lenders have started to offer signature loans for borrowers with bad credit. Aside from a good credit standing, anyone can be eligible to take out a signature loan for as long they are at least 18 years old and have a good source of income.
Where to Go?
You can apply for a signature loan like a payday loan or a cash advance. There are lenders that offer them online with no credit check. All you need to do is to find a good lender and your application will be processed online.
Signature loans can as well be obtained from local banks and credit unions. If you have a very good reputation in a community, getting approved for a signature loan would be very easy. A debt agreement will be signed and your signature will be the only guarantee that the bank needs.
What Are the Terms and Conditions?
A good and responsible borrower has to study the terms and conditions that come with signature loans. Like a short-term loan, a signature loan should be paid back within a short amount of time, within 30 days in general although some online lenders can grant longer repayment duration, 90 days at most. Signature loans also have high interest rates, from 8% to 20% depending on the bank.
While the terms and conditions may not be as favorable as other types of loans, particularly traditional bank loans, signature loans have become a better and easier alternative to getting instant cash, which can be very beneficial especially when unexpected expenses arise during emergency situations. Taking out a signature loan is also an easy and excellent way to rebuild a bad credit history by paying the right amount within the agreed payment date.