A signature loan is a term used in the past to describe or label unsecured personal loans. An unsecured personal loan requires no collateral and is thought to be secured only by the borrower’s signature on the loan agreement or contract. In the consumer loan arena, the phrase “personal loan” has become the preferred program name for many lenders and borrowers.
Qualified consumers can obtain signature loans from various institutions, including the following:
- Credit unions
- Finance companies
- Credit card companies
- Non-profit lenders
Structure of signature loans
As with most personal loans, a signature loan is typically issued as a lump sum and structured as an installment debt. In such cases, the signature loan borrower will have to make regular installment payments, as described in the loan agreement.
However, some creditors may also provide signature loans in the form of a line of credit, against which the borrower can draw repeatedly – up to the maximum credit line. Such signature lines of credit function much like credit cards, which are considered revolving debts.
Each lender will set its own guidelines for the signature loans it offers, so rates and terms do vary according to the lender’s financing programs and the borrower’s qualifications. So some signature loans may be as short as 14 days or as long as four years.
The lender’s guidelines will also dictate which borrower’s will be eligible for a signature loan. While some lenders may only want borrowers with perfect or near-perfect credit, other personal loan providers may offer more flexibility for consumers with damaged or less-than-perfect credit records.
Obtaining a signature loan
Signature loans are offered by many lending institutions, often as unsecured personal loans, in an array of loan types:
- Payday loans – a short-term form of signature loans often requires full payment with the next paycheck.
- Installment loans – some consumer loan providers offer unsecured personal loans with repayment terms lasting up to three years, or more.
- Credit lines – some lenders provide an unsecured credit line, similar to a credit card, that the borrower can use to obtain money as needed.
The traditional method for obtaining a signature loan involves just walking into a bank or credit union and completing a signature loan application. But with the advent of the web, many lenders and creditors have turned to the Internet to offer prospective borrowers with more convenient ways to apply for a signature loan.
In fact, direct lenders with fully functional online lending websites can review online applications immediately and provide loan offers or approvals in a matter of minutes (sometimes, seconds). And with direct deposits, approved borrowers can receive their loan funds within one business day. Best of all, consumers can shop, compare and apply for signature loans in the comfort and security of their own homes – rather than having to visit multiple lenders.
Disclaimer: NetCredit is a direct personal loan provider and does not provide financial advice, nor does it vouch for any vendor or service mentioned on our NetCredit personal finance blog or online consumer loan glossary. Always research and perform due diligence on any service provider or vendor before deciding to use them, and we recommend that you speak with a financial advisor regarding all decisions that will affect your finances.
Funding Circle is an online portal which allows savers to lend money directly to small businesses. The portal is the first site to use the process of peer-to-peer lending for business funding in the UK. As of 10 October 2011, Funding Circle has facilitated £23.5 million in loans to small and medium sized firms.
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