Understanding Signature Loans
Do you need money quickly? You might not have time to find or provide the collateral many banks may require in exchange for the required funds. Fortunately, you still have options. One of these options is a signature loan. Understanding what a signature loan is and how they work are the first steps to securing one.
What Is a Signature Loan?
A signature loan is what its name sounds like. It is a loan offered by a lender based on your signature on the loan documents and your promise to pay. A signature loan is also called a character or good faith loan.
Signature loans are unsecured loans. Unsecured means that you are not required to provide any additional collateral such as your car or other valuables to receive one.
These loans are fixed-term loans. Your interest rates and loan payment amounts will remain the same over the life of the loan.
High interest, low limit signature loans previously used as vehicles for people with bruised or bad credit have changed. Lower interest rates and higher lending limits make signature loans attractive to anyone needing money quickly.
How Do Signature Loans Work?
There are several things you need to obtain a signature loan. These include:
- An application
- A credit check
- Income verification
Some lenders may also require you to provide a few friends or family members' names, addresses, and telephone numbers. If they cannot contact you, they will use these numbers to attempt to send messages to you.
Because the lender does not require collateral, you must be credit-worthy, but your credit does not have to be perfect. Some lenders will offer loans to borrowers who have minor blemishes or bruises on their credit reports.
Once you provide the lender with the required information and sign the necessary loan documents, the lender will usually loan you the money then and there. There are generally no prolonged waits or additional approval needed for you to secure the loan.
Once you receive your funds, the lender will expect scheduled monthly payments until you pay your loan in full. Early repayment will vary from lender to lender. However, signature loans usually have reasonable payments that will fit your current income and budget.
What Are the Uses for a Signature Loan?
Unlike some loans earmarked for specific projects, such as your education, vehicle purchases, or other things, signature loans are designed for almost any purpose. You can use signature loans to:
- Pay unexpected expenses
- Pay educational expenses
- Pay for home improvements
- Pay for car purchases or repairs
- Consolidate other debts
- Go on vacation
Some lenders may inquire about your plans for the money, but they will not require any documentation that the funds were used for that reason. The lender's main concern is that you have the resources to repay the loan according to the terms in your contract.
How Do Signature Loans Differ From Secured Personal Loans?
Signature loans offer some similarities to secured personal loans in your flexibility in using the borrowed funds. Both loans may also provide similar repayment periods.
One of the most apparent differences is that personal loans require some collateral. The collateral can be anything of value, but some of the most common things are:
- Vehicles
- Investments
- Collectibles
- Savings accounts
- Real estate
Some states prohibit the use of vehicle titles, and some lenders are very selective about what type of collateral they consider. The value of your collateral may dictate the APR of your loan.
Also, signature loans allow you to get varying loan amounts that traditional banks won’t usually offer.
If you are in the market for a signature or personal loan, Ardmore Finance can help you. We will review your application and offer you the best loan for your situation. Give us a call today and let us help you find the money you need.
