Contact us whenever you need it!

+1 855 997 0206

Contact hours: Mon-Fri 8am - 10pm ET

LEGAL DICTIONARY

Signature Loan

What Is a Signature Loan?

A signature loan is an unsecured personal loan that can be given based on your character, income, or personal credit history. These allow a borrower to get funds without having to put up their assets as collateral.

These loans are named from the fact that you are being granted alone on the basis of your reputation or written signature. They are also known by the following names:

  • Character loans
  • Good faith loans

What Do You Need to Get a Signature Loan?

In theory, getting a signature loan is quite simple, although lenders are sometimes wary of granting them. This is because the creditor is subject to more risk than they would normally be in offering a secured loan.

Nevertheless, if a lender is willing to provide a signature loan you will only need to provide the following:

  • Your income
  • Your credit history
  • Your signature

To apply for the loan you should check your credit score is sufficiently high, prepare proof of your income (such as pay stubs or W2 forms), and find a lender. Once you’ve found a deal that works for you only need to accept the loan and follow the repayment schedule.

How are Signature Loans Different From Other Loans?

The biggest difference between signature loans and conventional lending is that they are unsecured loans. This means you don’t need to provide personal assets like real estate as a guarantee for the money.

Instead, the lender will only look at how good your credit score or income is and make a decision based on that. However, they may also require someone to co-sign on the loan agreement in case of a default on the principal.

Also, these kinds of loans will often come with higher interest rates due to the potential losses that could happen if you default. This allows the lender to gain a little more security upfront during the lifespan of the repayments.

When Do People Normally Ask for a Signature Loan?

There is no one reason that a signature loan may be requested. However, there are a few common causes that may prompt people to get a signature loan.

In most cases, signature loans are used in the following circumstances:

  • Making home improvements
  • Paying medical bills
  • Covering sudden expenses
  • Purchasing a valuable asset

Helpful Resources:

Investopedia - Signature Loan

Experian - What Is a Signature Loan?

Credit Karma - What Is a Signature Loan and How Does It Work?

What Is a Signature Loan?

A signature loan is an unsecured personal loan that can be given based on your character, income, or personal credit history. These allow a borrower to get funds without having to put up their assets as collateral.

These loans are named from the fact that you are being granted alone on the basis of your reputation or written signature. They are also known by the following names:

  • Character loans
  • Good faith loans

What Do You Need to Get a Signature Loan?

In theory, getting a signature loan is quite simple, although lenders are sometimes wary of granting them. This is because the creditor is subject to more risk than they would normally be in offering a secured loan.

Nevertheless, if a lender is willing to provide a signature loan you will only need to provide the following:

  • Your income
  • Your credit history
  • Your signature

To apply for the loan you should check your credit score is sufficiently high, prepare proof of your income (such as pay stubs or W2 forms), and find a lender. Once you’ve found a deal that works for you only need to accept the loan and follow the repayment schedule.

How are Signature Loans Different From Other Loans?

The biggest difference between signature loans and conventional lending is that they are unsecured loans. This means you don’t need to provide personal assets like real estate as a guarantee for the money.

Instead, the lender will only look at how good your credit score or income is and make a decision based on that. However, they may also require someone to co-sign on the loan agreement in case of a default on the principal.

Also, these kinds of loans will often come with higher interest rates due to the potential losses that could happen if you default. This allows the lender to gain a little more security upfront during the lifespan of the repayments.

When Do People Normally Ask for a Signature Loan?

There is no one reason that a signature loan may be requested. However, there are a few common causes that may prompt people to get a signature loan.

In most cases, signature loans are used in the following circumstances:

  • Making home improvements
  • Paying medical bills
  • Covering sudden expenses
  • Purchasing a valuable asset

Helpful Resources:

Investopedia - Signature Loan

Experian - What Is a Signature Loan?

Credit Karma - What Is a Signature Loan and How Does It Work?