A signature loan, sometimes shortened to sig loan, is another name for an unsecured personal loan. This is a type of loan you pay off in installments. You can use signature personal loans for many purposes, such as debt consolidation, home improvements, or unexpected expenses. These loans are generally available through traditional lenders, online banks, or credit unions.
How do signature loans differ from other loans?
Signature loans differ from secured loans, like a mortgage or car loan. They don’t 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’s sometimes called a good faith or character loan.
What can I use a signature loan for?
Signature loans are flexible financial tools you can use for a variety of purposes.
- Debt consolidation: You might save money on interest by consolidating higher-interest debt and other loans into one signature loan. By combining your debt, you may find it easier to manage a budget.
- Emergency or unexpected expenses: With a signature loan, you may get funds fast if approved, making it an ideal choice in emergencies. With Discover Personal Loans, most people get a decision the same day, and funds can be sent as soon as the next business day after your acceptance.*
- Major purchases and life events: Whether you have a home or auto repair, or you’re ready to start a big renovation project, a signature loan could help you manage your major expenses. It may also help pay for a dream wedding or a family vacation.
Where can I get a signature loan?
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.
People may prefer applying for a signature loan online because of the speed and convenience of doing the paperwork at home.
What affects the repayment terms of a signature loan?
The repayment terms of a signature loan are set by decisions made by both the borrower and the lender. The borrower chooses the length of time to repay the loan. How much the loan will cost—including the interest charged and possible fees—is decided 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, and 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.
What are the advantages and considerations of signature loans?
Advantages of signature loans
- Funds could be provided quickly.
- They don’t need you to assign assets as collateral.
- Late payments (although still something to avoid) don’t lead to loss of property.
- You’ll also 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 11.99% APR for a term of 72 months, you'll pay just $293 per month.
Considerations for signature loans
- For people who don’t have a strong credit history or credit rating, approval for a signature loan may be more difficult.
- Borrowers with a lower credit score might also have to pay higher interest rates.
- Signature loans may carry higher interest rates than secured loans, which are backed by collateral.
What do I need to apply for a signature loan?
Wherever you apply for a signature loan, you’ll be asked to meet several eligibility requirements.
For the application process, you’ll typically need to provide personal information like 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.
Most lenders will also run a credit check to determine whether you qualify for a loan. They may also review income, debt obligations, and identity details. Usually, starting the application process may take just a few minutes. If successful, you could be on your way to improving your financial position.
Now that you know the basics, you can determine if this is a good option for you.
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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.
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