What is a Signature Loan, and How Can It Help You?
Personal Loans vs. Signature Loans
A lot of people think that personal loans and signature loans are the same thing, and that these terms can be used interchangeably. However, that’s not technically true!
First, let’s define some loan terms. Collateral is something of value that a borrower pledges as security on a loan—if they default on the loan, the lender keeps the collateral. Secured loans require collateral; unsecured loans don’t require collateral.
The big difference between the two is that personal loans can be either secured or unsecured loans, and signature loans are always unsecured. This also means that a signature loan is a type of personal loan.
Personal loans can be secured by real estate, a vehicle or something else that’s financially valuable. Signature loans, however, only need your signature to take out the loan (hence the name)! No collateral is required, which typically makes them a more accessible type of loan. That being said, the best personal loan is not necessarily better than the best signature loan just because it’s harder to get.
Understanding What Affects Your Loan
Signature loans come with a number of factors that can vary. These include the loan rate, term, loan value and more.
Knowing the term of a loan can be a deal breaker for a signature loan. If you have to pay it back sooner than you’d be able to, it might not be the right time for you to take out the loan. Different lenders offer different terms, and the term varies by the loan’s amount.
The main factor that affects your signature loan is your credit score. Your credit score is most likely to affect your loan’s rate, but it can also affect the amount you can borrow. Your credit score is based on your debt payment history, amount of outstanding debt, credit history, credit mix and more. Borrowers with higher credit scores usually qualify for loans with better interest rates and higher amounts.
To learn more about how much you can borrow, what your rate might be or other possible specifics of a signature loan, try looking at an online loan calculator. This tool will let you plug in information about your situation and will help you decide if a signature loan would be a good solution for you.
What a Signature Loan Can (and Can’t) Be Used For
A signature loan can be used for just about anything you could need it for! Obviously, there’s a limit for how much you can borrow. As nice as unlimited funds would be, there is always a limit to your borrowing. As for what people typically use a signature loan for, there is no shortage of options!
If you can’t afford to pay off other debts and you don’t have collateral, a signature loan might be helpful. If you have a credit card with a high balance and high rate that you’re struggling to pay off, consider a lower-rate personal loan. You can use it to pay off your high-rate credit card debt all at once! This could bring down your monthly payments and raise your credit score at the same time.
Similarly, if you have several outstanding debts, a signature loan can help you pay them off all at once. You might see some lenders advertising debt consolidation loans, which are usually a type of personal loan similar to a signature loan. This gives the added benefit of having to only pay one monthly bill instead of several. When you consolidate your debts with a signature loan, you can save yourself time and money.
There are also happier uses for a signature loan! Maybe you want to take a dream vacation or renovate your home. The loan can help you afford a one-time big expense and allows you to pay for it in smaller installments.
Some purchases too expensive for a signature loan to cover. A home or a vehicle are most likely worth much more than what you can borrow with a signature loan. That’s why they have their own types of loans with their own features and benefits. Signature loans have lower values and are better at helping get your finances back under control or for making a relatively small purchase.
If you’re looking for something larger, then talking to a financial expert might help you learn your other options.
Taking Out a Signature Loan
If you’re ready for a signature loan, then you’re in luck!
There are many places to apply for a personal loan. Check for credit unions near you. There are going to be some lenders offering you a signature loan with bad credit. If you’re using your signature loan to pay off debt, this could be good for you. There is no guaranteed approval for personal loans for bad credit, but there are still chances for you to find the funds you need.
Larger credit unions and banks may also offer a signature loan, but you might get less flexibility with them. This means that the term, rate or other features might vary less depending on your circumstances. The best way to find out is to do plenty of research. Start by searching for credit union personal loans (since signature loans are a type of personal loan)—using this as a starting point can help find the best signature loan for you.
How to apply for a personal loan or signature loan varies from lender to lender
Talk to the financial institution, as they will be able to tell you what to look for and where to find the best personal loan rates. Many lenders have online applications, but some will have you apply in person.
Looking for a place to start? Shell Western States Federal Credit Union has great loans for those in Contra Costa County! If you’re not sure if you’re ready, visit a branch and we’ll help talk through your concerns.
