Signature Loans

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What are signature loans?

Signature loans are unsecured personal loans that don’t require you to put down collateral when you apply. To qualify, lenders will heavily weigh your finances, notably your credit.

The overall cost of your loan can vary greatly from lender to lender based on your creditworthiness and factors such as:

  • APR: Annual percentage rate indicating the actual yearly cost of the loan including additional costs like origination fees expressed as a percentage.
  • Interest rate: The cost of borrowing the loan principal only minus any additional fees.
  • Origination fee: A fee charged by some lenders to process the loan application.
  • Prepayment penalty: A fee charged by some lenders when the loan is paid off ahead of schedule.
  • Late payment fee: Late payment fees can not only ding your credit, they can add to the overall cost of borrowing.

7 uses for a signature loan

Medical Emergency Loan
Medical Emergencies

Major Purchase Loan
Major Purchase

Car Repair Loan
Unexpected Car Repair

Home Renovation Loan
Home Renovations

Credit Card Debt Consolidation Loan
Credit Card Debt Consolidation

Vacation Loan
Vacations

Wedding Loan
Wedding

Check out these signature loan lenders

LightStream
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Payoff
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Best Egg
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Peerform
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Rates 4.99%–16.79% 5.99% – 24.99% 5.99% – 29.99% 5.99%–29.99%
Terms 24 to 144 months 24 and 60 months 36 or 60 months 36 or 60 months
Loan amount $5,000 – $100,000 $5,000 – $35,000 $3,000 – $35,000 $4,000 – $25,000
Origination fee No origination fee up to 5.00% 0.99% - 5.99% 1.00% - 5.00%
Credit score requirement Not specified 640 640 600

Can you get a signature loan with bad credit?

If your credit score is damaged, you may be able to qualify for a signature loan depending on lender credit criteria. Expect interest rates to be higher than for good credit borrowers. Some lenders may require you to provide recent pay stubs, bank statements or tax returns to prove your annual income.

Even with less-than-stellar credit, you may have other options if you can’t qualify for competitive terms on a signature loan:

  • Home equity loan: Use your home as collateral to obtain a loan.
  • Peer-to-peer loan: Individuals and investors offer loans via peer-to-peer online marketplaces. Some lenders offer loans to borrowers with lower credit scores.
  • Credit card: Take advantage of promotional offers and your existing line of credit, especially if interest rates are more favorable than on a signature loan.

How to apply for a signature loan

  • Start the application process

    in-person at the lender branch, online or over the phone by providing basic personal and financial information.

  • Receive your prequalification offer

    Not all lenders offer prequalification, but those that do allow you to see the types of loan terms you may qualify for with a soft credit check.

  • Provide documentation

    such as recent pay stubs, tax documents and/or bank statements. Lenders may ask you to provide documents, like a driver’s license or passport, to verify your identity.

  • Submit to a hard credit check

    which will ding your credit. Lenders will use your financial information to determine how much money they will lend you, your interest rate and what fees they may charge you for the loan. It’s important prior to applying for a loan or credit card that you check your credit reports for accuracy and dispute any errors.

  • Receive your loan funds

    which may be disbursed as quickly as on the same day your application is approved, depending on the lender.

FAQ: Signature loans

A signature loan is an unsecured personal loan. You are not required to put down collateral. The amount you can borrow is typically based on your credit history and income, in addition to your signature, which is why it’s referred to as a signature loan.

Unsecured signature loans do not require collateral. Your ability to borrow is based on things like your credit score and income to name a few.

Be wary of no credit check signature loans as they are likely payday loans or cash advances in disguise and may come with extremely high interest rates and fees.

Initially, you will have to provide basic information like name, date of birth and Social Security number to determine eligibility. Lenders may later ask for proof of income and identity before approving your loan.

You can use a signature loan to pay for things like unexpected emergencies, debt consolidation or home renovation. However, some lenders won’t allow you to use the funds to refinance an existing loan with the same lender or buy stocks, bonds or other securities.

Lenders may allow you the option to “check your rates” during which they ask you basic information and perform a soft credit inquiry, which does not affect your FICO Score.

Some lenders may charge you an origination fee to process your loan application. The origination fee is usually expressed as a percentage of the loan amount. You may also encounter other fees, such as a prepayment penalty (if you pay off your loan early) or a late payment fee.

Some lenders can fund you the same business day that you are approved. Other loans can take up to two weeks to fund depending on the lender.

Your lender may charge you a late fee depending on how many days they receive payment beyond your due date. The amount you will pay and the number of days before you incur a late fee depends on your lender. You may also be charged a fee if you fail to make a payment due to insufficient funds in your bank account.

Signature loan vs. secured loans

A signature loan is a type of unsecured loan. When you’re borrowing money, you’ll usually need to make a decision between selecting a secured loan and an unsecured loan. Here are some key differences between these two types of loans:

SIGNATURE LOANS

  • Not secured by collateral like a home mortgage or car loan
  • Typically shorter loan term
  • Interest rate tends to be higher even if you have good credit
  • Loan amount tends to be smaller since you don’t put up collateral

SECURED LOANS

  • Secured by using collateral like your home, car, or other personal property
  • Can have a longer loan term
  • Interest rate tends to be lower than signature loans depending on your creditworthiness
  • Loan amounts can be larger since loan will be backed by collateral