What is a Signature Loan?
A signature loan is a loan offered by banks or other financial institutions that does not require collateral. Signature loans are also known as personal or unsecured loans since they are not secured by anything beyond trust that the borrower will pay it back. Consumers often use signature loans to consolidate debt, travel, or purchase big-ticket items.
How Can I Get a Signature Loan?
Signature loans typically require an acceptable credit score, proof of income, a healthy debt-to-income ratio, and proof of character. Because they do not require collateral, they are a higher risk for the lender and usually come with higher interest rates than collateral loans (i.e. auto loans and home loans).
You can apply for a signature loan online or through a bank or credit union. Depending on how good your credit score is, annual percentage rates (APR) on signature loans can range from 5% up to 35% or more.
[Use our loan calculator to see what your payments would be on a signature loan.]
What's the Difference Between Revolving Credit and a Signature Loan?
The main difference between revolving credit (i.e. a HELOC or credit card) and a signature loan is that a signature loan is a one-time loan with a stated maturity when it will be paid back.
Revolving credit stays open until the lender or borrower ends the relationship. Every payment opens up more credit, up to the credit limit.
