Best Signature Loans Online
Is a Signature Loan Right for You?
In the world of lending, there are many methods of borrowing money and just as much industry jargon bandied about. If you’re currently exploring the options open to you, one of the terms you might stumble upon is “signature loan.” But exactly what is a signature loan, and is it worth it for you to consider one? This article will tell you everything you need to know.
What Is a Signature Loan?
Back in the days before credit bureaus ruled our lives, financial institutions followed a different set of practices when it came to lending money. If an individual needed to borrow a certain amount, but they had no bank account or any funds to speak of, a lender might have issued what was known as a “good faith” loan based on little more than a signature, a handshake, and the lender’s hope that the borrower would repay the funds.
Over the years, this type of arrangement became known as a “signature loan,” based on the fact that it involved the borrower signing their name to a statement and agreeing to the terms of repayment. The term “signature loan” has largely fallen out of favor now that everyone has a credit report and an internet connection, but the principle concept still exists. These days, however, a signature personal loanis more often called an unsecured personal loan, where “unsecured” refers to the absence of collateral used to ensure a debt is paid.
How Do Signature Loans Work?
In general, when a borrower takes out a signature loan, they agree to make monthly payments toward to the full amount of the initial loan in addition to a fixed or variable rate of interest. The borrower’s specific interest rate is usually determined by their credit history, and the repayment terms can range anywhere from a few months to several years.
When lenders evaluate a potential borrower’s application for a signature loan, they usually like to see a long history of on-time payments paired with a high level of income. This kind of evidence can give lenders the surety they seek to grant an applicant’s loan request. Of course, not everyone has established a reputation for upstanding creditworthiness, which is when cosigners come into the picture. If your credit score is far from fantastic, you can recruit a friend or family member with a stronger score to also sign your loan application, thereby increasing your odds of approval.
Compare Signature Loans
When it comes to getting signature loans online, several lenders might be able to meet your needs. Here’s a quick comparison of three of our top picks.
- LendingClub — Loans from Lending Club are accompanied by APRs that range from 6.95% to 35.89% including origination fees from 1-6%.
- Upstart — Upstart looks beyond your credit score and considers other factors such as employment and education when determining your eligibility for a loan, yet specific terms vary by state.
- LendingPoint — This lender offers two- to four-year loans from $2,000 to $25,000 with APRs ranging from 15.49% to 35.99% and origination fees that range from 0-6%.
Pros and Cons of Signature Loans
If you’re evaluating your options as a borrower, here’s a quick look at the pros and cons of signature loans to help you determine if this solution could be right for you.
- Fast and Easy: Signature loans are typically fast to obtain, making them a great option when you need money right away. The application process can take mere minutes.
- No Collateral Necessary: With signatures loan, you don’t have to worry about losing property such as your house or car. And if you don’t own much to begin with, signature loans are likely your only option.
- Quick Way to Build Credit: By taking out a signature loan and consistently making monthly payments on time, you can build your credit score and qualify for better APRs in the future.
- High Interest Rates: With signature loans, only the most qualified applicants will get approved for the lowest APRs, and if you don’t have great credit, you’ll likely end up paying an interest rate well above the industry average.
- Smaller and Shorter: Because signature loans are unsecured, they’re usually only offered in smaller amounts and over a shorter span of time than other types of loans. This can disappoint borrowers who need more funds and more time to make ends meet.
Can I Get a Signature Loan With Bad Credit?
If you’re specifically searching for lenders that offer signature loans for bad credit applicants, you’ll likely find several, but many of them might charge extraordinary interest rates. So if you have bad credit, signature loans from direct lenders should be a last resort. Instead try finding a cosigner to help you secure a signature line of credit, which could have a lower APR than a loan.
» MORE: Bad credit loans
What Is the Interest Rate for a Signature Loan?
There’s no predetermined rate that applies to all signature loans across the board, but, in general, rates can range anywhere from 5% and 35% based on your credit history and other factors. It’s true, however, that APRs with signature loans will likely be higher than interest rates with other types of loans — namely, secured loans.
Signature Loans vs Secured Loans
If you’re looking for the lowest interest rate possible, you may wish to pursue a secured loan. This type of loan involves putting a piece of property, such as a car, up for collateral, which represents a pledge to pay back the loan or risk losing your property for good. Secured loans usually have longer loan terms and lower interest rates than their signature-based counterparts, and loan amounts can also be larger.
» MORE: Secured personal loans
When it comes to signature loans, there’s no shortage of options for you to evaluate. Based on your needs and your history as a borrower, you could qualify for a loan from any number of lenders. Hopefully, one of our top picks will provide you with the exact loan you seek.