Oct 16, 2023
A signature loan is another name for an unsecured personal loan, which you pay off in installments. You can use personal loans for nearly any purpose, including debt consolidation, home improvement projects, or unexpected expenses. Signature loans are usually available through traditional lenders, online banks, or credit unions.
Signature loans differ from secured loans, such as a mortgage or car loan, because they do not require collateral—something of value like your home or car that a lender can take if you don’t pay back your loan. Instead, a signature loan is backed by your promise to repay the loan. This is why a signature loan is also sometimes called a good faith or character loan in some places.
Repayment terms for signature loans can range from a few months to several years. Interest rates on signature loans usually differ among lenders, and similar to other loans, the interest rates are based partly on the credit score of the borrower, among other factors. People with higher credit scores might be offered a lower interest rate, while those with poorer credit scores might be offered higher rates.
Signature loans are flexible financial tools you can use for a variety of purposes:
Signature loans come with a number of advantages. In addition to offering the possibility of getting funds fast, signature loans do not require that you own assets to put up as collateral. While it is important to repay loans based on their repayment terms, with a signature loan, you wouldn’t need to worry that late payments could lead to the loss of your house or car.
In addition, with a signature loan, you know exactly when you have the loan paid off. For example, say you want to pay the loan off within 6 years—with Discover Personal Loans, if you get approved for an $18,000 loan at 12.99% APR for a term of 72 months, you’ll pay just $361 per month.
However, for people who do not have an established credit history or a strong credit rating, signature loans may be more difficult to obtain. Borrowers with a lower credit score might also have to pay higher interest rates. Even with a higher credit score, you may also find that signature loans carry higher interest rates than secured loans backed by collateral.
Signature loans, like other personal loans, are offered by both online lenders and traditional banks. You can decide which is better for you based on your financial needs and situation.
Many people prefer applying online because of the speed and convenience of doing the paperwork at home.
Wherever you apply for the loan, you are typically asked to provide your personal information, including your employer and income. You might also be asked to provide copies of W-2 forms, tax returns, or bank statements.
In addition, lenders usually run a credit check to determine whether you qualify for a loan. In many cases, starting the application process can take just a few minutes. If successful, you may be on your way to using a powerful financial tool to improve your financial position.
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*If your application is approved, we will send funds after you accept the loan. Your bank or creditor may take more days to process the funds.
