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The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: Morsa Images/Getty Images March 03, 2022 Jerry Brown is a contributing writer for Bankrate. Jerry writes about home equity, personal loans, auto loans and debt management. Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information. Bankrate logo The Bankrate promise
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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. If you’re looking for a loan that doesn’t require you to have collateral, a signature loan could be a good solution. A signature loan can be used for almost any purpose. Plus, you can receive funds fast — some lenders issue funds as soon as the same business day. However, like all financial products, these loans have disadvantages. Some lenders charge fees, and you may receive a high interest rate. Before you apply for a signature loan, look into the details of these loans to be sure it’s the right choice for you. What is a signature loan
A signature loan is an unsecured personal loan. Unlike a , this type of loan doesn’t require you to pledge collateral — something of value, like a bank account or house — a lender can seize if you fail to repay the loan. Instead, the loan is backed by your signature, which represents a legal promise to repay the loan funds. Because the loan is unsecured, lenders typically charge a higher interest rate than secured loans, such as mortgages and auto loans. The average interest rate for signature loans is often lower than the average interest rate for credit cards. Also, loan funds can be used for almost any purpose, such as medical emergencies, debt consolidation and major life events. How does a signature loan work
When you apply for a signature loan, a lender considers factors such as your credit history, income and credit score to determine whether you qualify for a loan. These factors also help a lender determine your interest rate and loan amount. If you’re approved for a signature loan, a lender will issue you a lump sum of cash. You then repay the loan amount, plus interest, over a set repayment period that typically ranges from 24 to 60 months or longer. What are the best uses of a signature loan
The best use of a signature loan depends on your unique financial circumstances. Here are some scenarios where using one might make sense. Debt consolidation
If you have high-interest debt, like credit card debt, using a signature loan to consolidate debt could be a good financial move. means paying off your existing debts with a new loan. If you qualify for a signature loan with an interest rate that’s lower than the average rate on your current debt, you can save a ton of money on interest. Emergencies
Signature loans also work well for covering unexpected expenses, such as medical emergencies, car repairs and home repairs. If you don’t have an emergency fund or the expense is too large to cover, you may be able to receive funds quickly. Major life events
If you need to pay for an expensive event, like a , move to another state or an anniversary party, a signature loan could help. Just remember to only borrow what you can afford to repay. Where can you get a signature loan
You can get a signature loan from several financial institutions, including banks, credit unions and online lenders. Banks
Traditional banks offer signature loans. If you already have a relationship with a bank, reach out to its customer service department to see if it offers signature personal loans. You may receive an interest rate discount for being an existing customer. Alternatively, you contact a bank by phone to see if it offers unsecured personal loans. Credit unions
Some credit unions offer signature loans, and the interest rate is often lower than those offered by banks. For example, the average rate for a three-year unsecured personal loan at a credit union was on Jun. 25, 2021, according to The National Credit Union Administration. By contrast, the average three-year rate for a personal loan at a bank was 10.09 percent. To take a personal loan out at a credit union, you must be a member or apply for membership. Online lenders
Multiple online lenders offer unsecured personal loans. To find them, you can visit an online marketplace or search for individual lenders. An advantage of applying with an online lender is that most allow you to prequalify to check your estimated rates and terms, without harming your credit score. Pros and cons of signature loans
Before you take out a signature loan, make sure you weigh the pros against the cons. Pros
Quick funding. Do you need money fast? Some lenders may issue your loan funds the same business day or within a few business days after loan approval. No collateral needed. Since all signature loans are unsecured loans, you don’t have to worry about a lender repossessing your car or foreclosing on your home (unless a court awards a judgment to the lender). Lower interest rates than credit cards. The average is typically lower than the average credit card interest rate. For instance, as of March 3, 2022, the is 10.28 percent. Cons
Some lenders charge fees, such as orgination fees, late fees, and prepayment penalties. These fees can greatly increase your borrowing costs. Potentially high interest rates. If you have bad credit, a lender may charge you a high interest rate. Some lenders have maximum advertised interest rates that are higher than 30 percent. Late payments can damage your credit score. If your payment is more than 30 days late, it can cause major damage to your credit score, making it harder to qualify for future loans. How to get a signature loan
If you think taking out a signature loan is right for you, follow these steps to get one: Review your credit report. Inaccurate and incomplete information can lower your credit score. Before you apply for a loan, review your credit reports to make sure they are accurate. You can view your Experian, Transunion and Equifax credit reports for free weekly through April 20, 2022, by visiting . If you find a credit reporting error, dispute it with each credit agency that lists it. Prequalify with multiple lenders. Compare your loan options by with as many lenders as possible. Once you submit your application, a lender will perform a soft credit check to review your credit, which has no impact on your credit score. If you prequalify, you’ll be given estimated rates and terms. Submit a formal loan application. Once you’ve chosen a lender, complete a loan application. You’ll likely be asked to submit personal and financial information, such as your name, employer, social security number (SSN), income and bank statements. Sign the loan agreement and receive funds. If your application is approved, a lender will send you a loan agreement to sign. Review the terms carefully and sign if you agree with them. Afterward, the lender should deposited the funds into your bank account within a couple of business days. Repay your loan. Make sure to repay your signature loan as promised. If you make late payments, you may pay a late fee and it could damage your credit, making it harder for you to take out future loans. Enroll in auto pay or use a spreadsheet to stay on top of your due date. SHARE: Jerry Brown is a contributing writer for Bankrate. Jerry writes about home equity, personal loans, auto loans and debt management. Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information. Related Articles