There are many different types of loans that you can apply and qualify for, but very, very few can compare to the simplicity and versatility of signature loans. Whether you need cash fast for an emergency bill or you're looking to start your own business, signature loans might be right up your alley.
What are signature loans?
Signature loans are unsecured loans with very few qualification requirements beyond your signature and the promise that you’ll pay it back. That’s why signature loans are also called good faith loans or character loans. They have practically nothing to do with your credit rating, standing, and history, but because they’re an unsecured loan, the interest rates may be higher than other loan types due to lender shouldering the brunt of the lending risk with the lack of collateral involved.
Signature loans are also a type of installment loan, or term loan, that has a fixed interest rate and set length so the borrower pays the same exact amount every month, plus interest of course. However, not all lenders provide a fixed interest rate on their signature loans since you can find loans with a variable interest rate though these are more rare than their fixed counterpart.
How can signature loans be used?
Signature loans can be used in a variety of ways both by individuals and businesses. They can be used for a home improvement project at your house, to pay for an emergency medical bill, cover a semester of college, or get funding for a business start up. This type of loan can also be an option for debt consolidation depending on the interest rates on your other loans. No matter why you need one, signature loans are an incredibly versatile loan type that can get you the money you need when you need it, no questions asked.
How do I qualify for a signature loan?
Traditionally, all you need is a signature. However, some lenders are starting to require soft credit checks to ensure that prospective borrowers have room in their finances to afford repaying their signature loan. While this isn’t true across the board and isn’t an industry standard, it’s picking up steam.
Who are signature loans good for?
Because of the very lax approval requirements, signature loans have typically been targeted towards and taken out by individuals with bad or no credit. These were the only loans that they could qualify for that don’t require an asset of some sort to be put up as collateral. However, this has changed over the years as interest rates have dropped while maximum amounts have increased which has made them more appealing to a much wider audience.
Signature Loan Pros
Easy to Qualify: With the only approval criteria being a signature and your word that you’ll pay it back, signature loans are one of, if not the easiest loan to qualify for.
Medium Sized Loans: While the amounts vary from lender to lender, the standard signature loan ceiling we’ve seen during our research for our loan reviews is about $25,000. This is a healthy amount of money that can help you get your life back on track, fund a pet project, or conveniently start a business.
Lower Interest Rates: Signature loans typically have interest rates in the 9 - 20% range which is better than many types of loans and credit cards. This make them far preferable, and more affordable, when compared to other forms of credit.
Signature Loan Cons
Higher Interest Rates: “But wait, you just said they were low.” Yes, signature loans have lower interest rates than other short term loans, but they can still be higher than secured loans, which are harder to qualify for, but if you can qualify for them, they can cost you less in the long run.
Possible Credit Check: Depending on the lender and your relationship with them, they may choose to check your credit. If you have bad credit, this can lead to higher interest rates, different loan terms, and flat out denial. If you have okay to good credit, it can affect your credit score because it is an inquiry.
Why should you get a signature loan?
If you need a loan, there really isn’t a reason not to get a signature loan. They’re one of the easiest types of loans to qualify for, their interest rates keep dropping, and their loan amounts keep climbing. They’re incredibly affordable and provided that you aren’t planning on trying to use one to buy a house, they can be used for practically anything, as we’ve mentioned elsewhere multiple times.
Where can I get a signature loan?
We regularly review lenders and you can find them on our signature loan providers page.