3 Facts To Know About Signature Loans

Posted on: 7 October 2021

You might experience times when you need more cash for your bills or expenses than you have on hand. When you encounter these situations, you might turn to a lender for a loan. One type of loan you can get is called a signature loan. If you are unfamiliar with signature loans, you might want to learn a few things about them before pursuing them. Here are three facts about signature loans to know.

1. They Do Not Require Collateral

The first fact about signature loans is that they do not require collateral. A signature loan is not a secured loan. Instead, it is an unsecured loan, which means the lender does not ask you for collateral. They do not tie any assets to the loan. Instead, you get the loan based on your signature. Your signature tells the lender that you have the intention of repaying the money as agreed. As a result, you might need to go through a credit check to make sure you are not too much of a risk for the lender.

2. They Might Have Higher Interest Rates than Other Loan Types

The second fact to know is that signature loans generally have higher interest rates than other loan types. Lenders charge higher rates for several reasons. First, these loans have more risk to lenders than other loan types because there is no collateral. Secondly, signature loans have eligibility criteria that are less stringent than other loan types. 

3. They Often Require Installment Payments

The third fact to know is that signature loans typically require installment payments. In other words, you will not have to repay the loan in full on a specific date. The lender lets you make payments on the principal balance. You make a payment each month that goes toward principal and interest. Over time, you repay the entire loan. You will know how many payments you must make when you borrow the money, and you will also know how much the payment amount will be each month.

When you need to borrow money to pay for unexpected expenses or anything else, you might want to turn to a signature loan. Getting a signature loan might require a credit check, but they are easy to get and offer a fast way to get some cash. If you have questions about signature loans and the requirements for getting one, contact a lender today.