What are signature loans? As the name indicates, these are loans that made based solely upon a person’s or a business’ signature. There is absolutely no collateral that needs to be put up against the loan to secure the debt for the lender on the off-chance that the borrower defaults on their obligation.
Signature loans come in all sizes. Some lenders will make signature loans for $1500 and less, typically these loans are made for $500 or $1000. Some of the lenders that make signature loans for these small amounts will make these types of loans for as little as $100. These signature loans that are for $1500 and less are usually referred to as payday loans. Oftentimes people obtain these types of loans to help them make ends meet in between paychecks. The money received from signature loans can be used for any reason whatsoever. The proceeds from the payday loan variety of the signature loan is usually used to satisfy extremely short term debts. People tend to use this money to pay their rent, mortgage, or utility bills that are due prior to the time when they would receive their next paycheck. Since these are short-term debts, they are usually due quickly, sometimes as soon as your next payday. Click here to find a list of excellent lending institutions that offer payday loans. Many of these lenders specialize in offering signature loans for bad credit individuals.
There are larger signature loans available as well. Some times you can obtain signature loans for $5000, $10,000, or even $25,000. If you are looking for larger signature loans, you will need to have better credit history. Typically lenders need collateral before they are willing to loan money to people or businesses. It certainly makes sense that a lender will want to have some tangible asset backing the loans that they are making. On the possibility that the borrower doesn’t make their payments, the lender may need to call the loan and they will want to receive something in exchange. However as mentioned earlier, signature loans are not backed by collateral. They are only secured by your signature. Since this is the case, lenders will scrutinize your FICO score (credit score) to make sure that you are a viable candidate to make this type of loan to. The trade off for not having to put up any collateral is that the terms on unsecured signature loans are usually not as favorable as with secured loans. Typically, the interest rate on signature loans is considerably higher than it is on secured loans. So you will need to pay more to borrow money with this type of loan than with a typical, secured loan. You can get cash fast with signature loans. Borrow up to $10,000 or even $25,000 if you have good to excellent credit.
Banks and other lender institutions may be reluctant to loan money to you. In today’s economy, it is more and more difficult to secure financing. Even people who have a good credit history who are looking to secure a loan may find the sledding difficult in recessionary times. A great alternative that has been gaining popularity is social lending. Through social lending, or peer to peer lending as its commonly referred to, allows individuals and/or small businesses the ability to get together to loan and/or borrow money from one another. People (or small businesses) who are looking to borrow money, who are having a hard time getting a loan from a traditional lender (or even if they aren’t) should consider peer to peer lending. You may be able to borrow money when others are unwilling to loan money to you. You might be able to obtain these loans at better interest rates than you can get at traditional lenders as well. Those people who have a little extra money may want to act as the bank and lend money to other people. The people who are lending money will get a better rate of return than they would if they put their money in the bank, but there is greater risk. If a borrower defaults, the lenders are out their principal. Lenders can minimize this risk by spreading their risk out amongst multiple borrowers. The interest rate that borrowers pay, and lenders receive, is based upon the borrower’s FICO score. The better the FICO score, the lower interest rate that the borrower needs to pay and the greater likelihood that they will be deemed a good credit risk and will offer greater security to the lender. You can check your credit score now and fix one problem for free right now.
There are many opportunities to secure a signature loan. You can use pay day lenders for smaller short term loans, traditional lenders for larger signature loans, and peer to peer lending sites to obtain loans by bypassing traditional lenders.
- Charge you late fees
- Send your account to a collection agency
- Report your information to a consumer reporting agency, which may negatively affect your credit score
- Offer to renew, extend or refinance your loan, which may cause you to incur additional fees, charges and interest