What is a Signature Loan?

Signature loan is a loan that does not require collateral.  Signature loan's got their name because the only real requirement was a borrower's signature. These loans are also known as unsecured or personal loans.

Loan Qualifications

The applicant's credit history and debt ratios are fundamental pieces of the qualification process a lender examines. People with lower debt ratios have a better chance of becoming eligible to borrow the money. Since the loan is not a secured collateral loan, many lending institutions apply a standard credit score minimum. Typically, banks do not grant  loans to poor credit consumers.  Additionally, lenders examine income stringently before approving the application.

Interest Rate

The interest rate of  a signature loan is higher compared to other types of loans because of the absence of collateral. The rate is also determined according to risk factors. Risk is calculated and evaluated based on the individuals financial and repayment capabilities. People with higher risk are typically charged higher interest rates and fees.

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