Signature Loan Basics
Are you making home improvements? Do you have a big wedding or vacation coming up? Do you have an overwhelming amount of debt payments you would like to consolidate? Do you need cash quickly for any reason? If you need cash quickly, you have several options, some better than others. Rather than risk your home by taking out a home equity loan, or risk you life by dealing with a loan shark, think about going to your bank and taking out a personal signature loan. Let's answer some basic questions about personal signature loans.
What is a personal signature loan?
A personal signature loan is a loan that you can take out merely by signing an agreement to pay it back to the bank or loan institution you are borrowing from. The approval process is quick and easy and you don't even have to have good credit to get this type of loan. You don't have to specify what the loan is for. This type of loan gives you the freedom to walk into a bank or credit union and come out (either that day or within just a few business days) with money in hand just on the strength of your signature. If you need a quick cash source, a personal signature loan may be a great option.
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What are the different types of personal signature loans?
There are several different types of personal signature loans. The type you choose to apply for will depend on your credit situation and whether you have collateral for the loan or not. The types of personal signature loans available can be classified into three categories: secured signature loans, unsecured signature loans, and bad credit signature loans.
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Top Four Reasons for a Signature Loan:
The popularity of personal signature loans is on the rise and so are the reasons for taking this type of loan out. Although most of the time you don't need to declare the reason for you loan, there are some very popular reasons the majority of borrowers use their loans for. Those reasons are below: Home Improvement
If you aren't taking on a major remodeling job, then why risk your entire home with a home equity loan to make small improvements? A personal signature loan allows you to take just enough money out to paint the baby's room, or buy the furniture to finish your basement, or re-tile a bathroom floor. Even if it's a major remodel on one room, you can still get enough money from a personal signature loan to complete the project. College Tuition
You save and save for your kids to go to school, but when the time actually comes, you may not have enough. Don't take out a second mortgage on your house to send Jack and Jill on their Ivy League dream. A personal signature loan can give you enough to pay for tuition, room and board, books, and anything else their little hearts desire.
Dream Vacation Why use your savings for your dream vacation when they could still be earning you money as you relax on the beach. Take out a personal signature loan secured by your savings account and allow yourself the comfort to know you can vacation in style and still be earning dividends.
Debt Consolidation If you are making more payments toward debt each month than you can truly afford, it is time to consolidate it into one low monthly payment. One way to do that and not hurt your credit in the process is to take out a personal signature loan. This allows you to pay back everyone you owe and give you the relief of only paying one debt bill. |
Secured signature loans use your savings account to secure the loan in case you default on it. You can't touch your savings account at all if you decide to take out this type of loan. The way it works is you can borrow up to the amount of savings you have then pay it back over a specified amount of time. This type of personal signature loan typically comes with a low interest rate and a great pay back period without touching your savings, so it is still earning dividends for you the entire time you are carrying your loan. This type of loan can also work with stock share certificates deposited with your bank or credit union rather than a savings account.
Unsecured personal signature loans are a loan of cash granted to the borrower based on your ability to pay it back. This type of loan does not require any type of collateral and are generally extended for a specific purpose whether it be college tuition, home repairs, vacation, etc. Borrowers with good to great credit benefit the most from this type of loan opportunity as they are given a much lower rate of interest and better and better terms as these types of loans gain popularity.
Bad credit personal signature loans are for those who have bad credit and may not have any type of collateral to get a better type of loan. Bad credit personal signature loans come in two types: secured and non-secured. A secured bad credit personal signature loan would require the borrower to pledge some type of collateral to secure the loan, but if you savings account isn't up to par, you can substitute a car, furniture, electronics, or something other type of collateral instead. In the event that you default on this type of loan, your lender can collect the collateral and sell it to recover what they lost on your loan. A secured bad credit personal signature loan has lower interest rates than a non-secured because you have collateral to back you up. Non-secured bad credit personal signature loans don't need collateral pledged, but if you fail to pay the loan back, they will send a collections agency after you. This type of loan carries the highest rate of interest of any personal signature loans as the lender stands the greatest risk of loosing money.
What are the terms of a personal signature loan?
The terms of a personal signature loan vary widely depending on the type of loan you choose to take out and the amount. Personal signature loan amounts can be from $500 to $50,000 depending on the type of loan and your credit history. A secured personal signature loan can be as much as $50,000 with an interest rate as low as 3% with a pay back period of 60 to 72 months while a non-secured bad credit personal signature loan amount can be as high as $10,000 with an interest rate can be as high as 25% and a 1 to 4 year pay back period. Any type of personal signature loans can offer you automatic payment withdrawals from your checking account, a quick approval process, and depositing the loan directly into your account for use. Use a loan finding agency to find the personal signature loan that best fits your circumstances and needs as they can help you secure the most amount of money at the best rates possible with a payback period that is optimal for you.
What are the pros of a personal signature loan?
There are many good details about a personal signature loan that make it an appealing option as a quick cash source. These are discussed below:
- Convenient - You walk into your bank or credit union, sign for the loan, and are approved within days if not minutes. There is virtually a 100% approval rate for all applicants within the number of personal signature loans available. The money is deposited directly to your account for immediate use. You don't have to pledge collateral for some types of personal signature loans, and the other types are still convenient to you.
- Competitive - Personal signature loans come with competitive interest rates and pay back periods, especially for those with good to great credit. Because you can go to any loan provider and get a personal signature loan, the amount you can get for your circumstances is competitive too.
- Large Loan Amounts - Personal signature loans can offer you large loan amounts if your credit is good and your savings account is used as collateral. Some banks or credit unions offer as high as $50,000 for your signature. That's a big loan for so little.
- Builds Credit - Paying back this type of loan reflects well on your credit history, so if you have bad credit, this is one way, if you need money, to start re-building your credit. Even for those with good credit, this type of loan can reflect well on your credit score as 40% of your credit score is based on you payback history.
- Low Risk For You - This type of loan offers a low risk way for you to get cash quickly. An unsecured loan offers competitive interest rates, convenient payback periods, and almost no risk for you. If you do happen to default on your loan, you can re-finance and work out a payment that is better for you. Always be conservative with the amount of money you borrow so you can be sure you will be able to pay it back.
What are the cons of a personal signature loan?
There are some downsides to taking out a personal signature loan. These include:
- Can Hurt Your Credit - If you default on your personal signature loan, it can really hurt your credit rating. These types of loans have one of the highest rates of default, so be moderate on the amount you take out. Make sure you really can pay it back within the terms specified. If there is any question, don't take out the loan, or take out a lesser amount and make up the difference some other way.
- May Not Be Able to Get Enough - Although you can get a large amount of cash from a personal signature loan, with your particular situation or credit, it may not be enough for what you need. Although this type of loan is easy to get, it's because you aren't taking out as much as you would with other types of loans.
- High Interest, Short Payback Period - You may be able to get a signature loan at 3% interest, but that isn't typical and most people won't qualify for that good of an interest rate. Interest rates are generally much higher, especially if your loan is unsecured or your credit history is poor. The payback period, though it can be several years, is a short amount of time to be able to pay back a loan of the size that can be taken out. Be very careful about how much you take out and the terms you agree to as the length of time given may not be feasible for you and your situation.
Whatever your decision may be on whether a personal signature loan is right for you, it can be used as a quick cash source no matter your credit history or whether you have collateral or not to secure the loan, so it's a good option in a pinch.
