What is a Signature Loan? Everything You Need to Know
What is a Signature Loan?
A signature loan is essentially another name for an unsecured loan. Essentially, it means that instead of agreeing that the lender can seize your property if you default on your loan, they act on good faith.
A secured loan means you offer collateral (your property), but a signature loan simply means you promise to pay it back. Of course, if you break your promise, the consequences can still be severe, but you won’t lose your home.
These loans are, in most cases, paid back by installments. This means that over the life of your loan (typically 3-7 years, but can be longer or shorter), you will pay back the entirety of your loan and the interest incurred. At the end of that period, the loan and any associated fees are paid off, and you have nothing more to pay.
How Do Signature Loans Work?
Signature loans work in the same way as any other unsecured loan – you apply to borrow a certain amount over a predefined term, and if approved, you’ll be offered a loan agreement. This will tell you what interest rate they are willing to offer you, as well as the total cost of the loan. If you agree to the terms, you sign, and the money will be in your account as little as a few hours.
When are Signature Loans a Good Idea?
Signature loans may be a good idea if you want to borrow thousands of dollars to make a large purchase or improvements. (Our lenders offer loans between $1,000 and $35,000.) Since a signature loan is tied to you, and not what you spend the money on, you are technically free to spend it how you please. However, taking out a loan should always be taken seriously, so don’t take one out without a good reason to do so. For example, you may choose to use your loan for:
- Debt consolidation
- Wedding costs
- Medical bills for you or a pet
- A new vehicle
- To repair a vehicle
- Home improvements and repair
- As funding for your side-hustle business
It’s not often wise to take out a loan to cover an emergency, but if you believe it is necessary, read this article to learn how you can get one and when it is a good idea to use one.
When Aren’t Signature Loans a Good Idea?
Signature loans – or any loan – are not a good idea if the rates are high and you are concerned that paying it off each month will be a challenge. Stretching yourself financially is never a good idea, and you need to consider what you’ll do if another emergency occurs.
What Happens if You Stop Paying a Signature Loan?
If you stop paying back a signature loan, the lender will continue to pursue you for the full amount, but they can’t and shouldn’t try to take your assets, such as your home or vehicle. Instead, your credit rating will be seriously affected until you take care of the situation, meaning it’s highly unlikely you’ll be able to take out any form of new credit.
If you are forced to stop paying back your signature loan, talk to your lender as soon as you know there may be a problem. Communication is key – though it is uncomfortable – and many lenders will do what they can to help you through a difficult time.
What Kind of Rates Can You Get on a Signature Loan?
This depends entirely on your credit rating and history, the amount you want to borrow, and how long you want to borrow it for. If you have outstanding credit, the lowest you’ll likely to get is around 5%, but most signature loans are in the 7-16% range, many higher. Most signature loans offer a fixed rate, but some do offer variable rates, which means your payment could change significantly over time, so always do your research if you’re looking at a variable rate loan.
To get the best rates, you should always compare loans before moving forward and agreeing to any offer. When you compare what lenders are likely to offer you, you can choose not only which lender offers the loan for the lowest cost, but also the lender who is most likely to lend you the money in your circumstances.
What affects your likelihood of being approved by a lender are things like:
- Your credit score
- Your credit history
- Your income level
- Your outgoings
- Other debt commitments
- Whether or not you have dependents
- How long you’ve been in your position
- What industry you work in
And other factors. Some lenders will only offer their best-advertised rate to those in the strongest position, while others will offer a good rate to a wide range of people.
That’s why it’s so important to use a comparison service that can offer you a realistic view of what you can get, and ensure you don’t apply for a signature loan you’ll be rejected for.
To apply through us, you need a minimum of 90 days in your current position of employment, you need to be a US citizen or permanent resident, to be aged 18 or older, and an income of $1,000 a month after tax, though more is preferred.
Can You Get a Signature Loan for Bad Credit?
Yes, though that does depend on your definition of “bad.” If you have multiple recent defaults, you almost certainly won’t be approved for a new loan – and not one with a reasonable interest rate.
If a couple of missed payments has harmed your score, however, or you have high utilization, you will likely still have a good chance of getting approved for a signature loan.
How Do I Apply for a Signature Loan?
The application process for any signature loan should be simple, but with us, it’s even more straightforward. Simply:
- Fill out our application form, and we’ll compare hundreds of loans for you
- We’ll show you the best loan (or loans) for you, that we believe you’ll be approved for easily based on the information you gave us
- You choose which loan you want, and we’ll redirect you the lender’s site
- Accept the lender’s terms
- Your money will be with you in as little as a few hours
- On your agreed date, you’ll start to pay back your loan in your pre-agreed monthly installments.
Click here to get started with your application and see which loan options are available to you. There is no obligation to move forward with your application if you change your mind.