how a signature loan works
to determine whether to grant a signature loan a lender typically looks for a solid credit history and sufficient income to repay the loan in some cases the lender may require a co signer on the loan but the co signer is only called upon in the event that the original lender defaults on payments signature loans are one type of unsecured term loan unsecured refers to the fact that these loans are not secured by any form of physical collateral unlike home mortgages and car loans term means the loan is amortized over a predetermined time period and paid off in equal monthly installments signature loan vs revolving creditapplications for regular credit or revolving credit loans normally trigger a funding delay while the banking institution or loan company examines the borrower s credit history and checks personal qualifications 2 by contrast the funds obtained through signature loans are deposited in the borrower s account more quickly allowing earlier allocation to financial needs as soon as a signature loan is paid off the account is closed and the borrower needs to apply for a new loan if they require additional funds in contrast a revolving credit account allows the indebted party to repay the loan and maintain the line of credit until the borrower or lender chooses to end the relationship and close the account examples of signature loansborrowers use signature loans for a range of purposes including home improvement unexpected expenses medical bills vacations and other large expenditures some borrowers also use signature loans to consolidate other debts adding a co signer on a signature loan may help a borrower with a minimal credit history or a low income let s say a borrower gets a signature loan with a 7 interest rate for an amount equal to the total of balances that they are carrying on credit cards with rates ranging from 12 to 20 the borrower then uses the signature loan to pay off the credit cards in full the borrower will realize distinct savings by repaying the same amount of money at 7 rather than at the former higher rates if you re thinking about taking out a signature loan then a personal loan calculator could be useful for figuring out what the monthly payment and total interest should be for the amount you re looking to borrow 