What is a Signature Loan?
If you want to know about a signature loan, you are in the right place. A signature loan is also known as an unsecured loan, good-faith loan, or personal loan.
Who Offers Personal Loans?
Typically, banks and finance companies offer personal loans. These financial institutions only use the signature of the borrower and as collateral. If you are a borrower of a signature loan, you can use it for any purpose. You need to know that the rate of interest is higher compared to other forms of credit, which lack collateral.
When it comes to approving a signature loan, the lender may look for a credit history along with the income of the individual in order to determine whether or not the person can repay the loan. In some situations, the lender may ask you for a co-signer who will sign a promissory note. The co-signer will be called upon by the lender in case you are short on the repayments.
Credit Cards and Signature Loans
As already mentioned, you can use a signature loan for any purpose such as unexpected expenses, home improvements, vacations, and medical bills. You can also this type of loan for consolidating other debts. For instance, if you get the signature loan with an interest rate lower than your credit car, it may be a wise to pay off the credit card with the short term loan.Then, as you repay the loan, you will end up spending less money on the interest – thus, allowing you to save money in the long run.
Who Uses Signature Loans?
While the structure and purpose of a signature loan have not changed for many years, experts say that the profile of the borrower who wants to access a signature loan has changed.
Previously, borrowers who had poor credit scores and wanted to take out signature loans – but since the loan maximums have escalated and the rate of interests have fallen, many borrowers who have relatively high income and good credit – are turning to signature loans. Most of these borrows are typically businessmen.
Advantage of Signature Loans
There are many types of loans, which you can use for specific purposes. These types of loans are “auto-loans,” “mortgages,” and “student loans.” On the other hand, you can use a signature loan for anything. Most of the time, a signature loan does not require collateral, which makes it a great choice for you – especially if you having nothing of value to borrow against.
Another advantage of a signature loan is that you can borrow any amount. For example, typical amounts for a signature loan usually range between 1500 dollars to 10,000 dollars with good credit.
Credit Score and Interest Rates
For instance, it is absolutely possible for you to qualify for a signature loan – even if you have a poor credit score. There are many lenders who offer signature loans to people with low credit scores such as below 600. However, it is important that people with low credit scores are likely to pay high-interest rates.