Oct 10, 2024
A signature loan is another name for an unsecured personal loan. This is a type of loan you pay off in installments. You can use personal loans for nearly any purpose. Some examples are debt consolidation, home improvements, or unexpected expenses. These loans are generally available through traditional lenders, online banks, or credit unions.
Signature loans differ from secured loans, such as a mortgage or car loan, in that they do not require collateral. This means a lender cannot take something of value, like your home or car, if you don’t pay back your loan.
A signature loan is backed by your promise to repay it. This is why it is sometimes called a good faith or character loan.
The repayment terms of a signature loan are set by decisions made by both the borrower and the lender. Typically, the length of time chosen to repay the loan is made by the borrower. How much the loan will cost—including the interest charged and possible fees—is made by the lender.
Interest rates on signature loans often differ between lenders. Repayment terms for signature loans can range from a few months to several years. The amount of your monthly payment will be based on your interest rate and the repayment term of the loan. You can estimate what your monthly payments might be for a Discover® personal loan with our personal loan calculator.
Keep in mind that interest rates are based partly on the borrower’s credit score. People with higher credit scores might be offered a lower interest rate. Those with poorer credit scores might be offered higher rates. Also, some lenders may charge origination fees or penalties for early repayment. At Discover Personal Loans, there are no fees of any kind as long as you pay on time.
Signature loans are flexible financial tools you can use for a variety of purposes.
Signature loans come with several advantages. In addition to providing funds quickly, signature loans do not require you to assign assets as collateral. It’s important to repay loans based on their repayment terms, but with a signature loan you don’t need to worry that late payments could lead to the loss of your property.
In addition, you will know exactly when the loan could be paid off. For example, with Discover Personal Loans, if you get approved for a $15,000 loan at 12.99% APR, you'll pay just $301 per month for a term of 72 months.
For people who don’t have a strong credit history or credit rating, though, approval for a signature loan may be more difficult. Borrowers with a lower credit score might also have to pay higher interest rates. Even with a higher credit score, signature loans may carry higher interest rates than secured loans, which are 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 a signature loan, you will be asked to meet several requirements.
You’ll typically need to provide personal information, such as your employer and income. You might also be asked to provide copies of W-2 forms or proof of income, 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 improving your financial position.
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