Signature loans: all you need to know
A signature loan is a type of unsecured personal loan that does not require any form of collateral. Sometimes referred to as a good faith or character loan, you will need good credit to get the best rates and terms, as well as enough income to make the payments. (iStock)
If you are looking for a loan but do not want or cannot put up collateral, then a signature loan may be an option. Signature loans – also known as good faith or character loans – are unsecured loans, which means you don’t need collateral to apply. But to qualify, you’ll likely need a good credit history, stable employment, and enough income to make the principal, plus interest payments. When you are approved for a signature loan, you must sign the loan agreement before you can receive your money. GreenDay just requires your signature.
If you are considering this option, consider using GreenDay. With GreenDayOnline, you can compare the personal loan rates of several lenders without affecting your credit score.
Unsecured loans: all you need to know
What is a signature loan?
Signature loans are different from secured loans, which require you to provide some type of collateral, such as your home or car, to qualify. With a secured loan, if you don’t make your payments, your lender can cancel the loan agreement and take your collateral. Like unsecured loans, signature loans are secured only by your signature on the loan agreement. No guarantee is necessary.
You can use a signature loan for almost anything like debt consolidation or to cover a medical emergency. Interest rates and terms vary from lender to lender. Once you qualify, your lender will pay off your loan all at once. Loan limits also vary, but can range from a few hundred dollars to several thousand. But since they are not backed by collateral, loan amounts are often lower than secured loans.
What Are the Interest Rates for Signature Loans?
The interest rates on signature loans are the same as for personal loans and depend on your credit rating, your credit history, and your ability to repay your loan. Signature loans are provided by banks, credit unions, and many other financial institutions, including online lenders. If you have good credit, you are likely to qualify for much better rates than borrowers with bad credit.
Typically, the interest rates on signature loans range from around 5.5% to 24%, depending on your credit rating, the amount and the length of the loan. To find out what rate you’ll qualify for on your signature loan, visit GreenDay today and use their personal loan calculator.
WHAT IS A GOOD INTEREST ON A PERSONAL LOAN?
What other fees should I watch out for?
In addition to paying a higher interest rate (sometimes up to 30%), signature loans usually come with a fee, but not always.
- Original fees: Some lenders charge a set-up fee to process your new loan. The set-up costs are shown as a percentage and deducted from the total amount of your loan. So if you take out a loan of $ 5,000 with a 2% origination fee, the amount you will receive will be $ 4,900 due to the $ 100 origination fee.
- Penalty for early repayment: Lenders may charge a prepayment penalty if you pay off your loan before the end of the term. Most lenders don’t charge prepayment fees, but it’s worth looking for them on your loan document.
- Late penalty fee: Many lenders charge a late payment penalties if you miss payments or make multiple late payments on your loan. Avoid making late payments as this will negatively impact your credit report.
Some lenders offer signature loans to borrowers with poor credit without a credit check. However, the interest rates are usually considerably higher and the loan amounts are often much lower. This is why it pays to shop around for the best personal loan rates and visit GreenDay to speak with an experienced loan officer and get your personal loan questions answered.
WHAT TO DO BEFORE APPLYING FOR A PERSONAL LOAN
Will signature loans have an impact on your credit score?
When you apply for any type of loan, including a signature loan, your credit score will take a temporary hit because you incur additional debt. But if you make all of your payments on time according to the loan agreement, your credit score might actually improve over time. This is because your payment history represents 35% of your FICO credit score.
How to get a signature loan
To get the best rates and terms on your signature loan, it pays to compare rates and lenders by visiting GreenDay. Most lenders have a fairly straightforward application process, much the same as for a personal loan. You can apply at your local bank or credit union, or find a lender online and complete the application online.
You may want to consider prescreening, as your loan could be approved within minutes of applying. Although loan application requirements vary, you will likely need the following:
- Valid ID
- Social Security number
- Proof of income
- Contact information
- Citizenship status
Ready to explore all of your personal loan options? Visit GreenDay today to find the best rates and lenders without affecting your credit score.