Having a stable and sufficient income instills confidence that you’ll be able to make your loan payments. When you apply for a signature loan, your lender will want to know that you can repay the debt. Some lenders will accept credit scores between 600–630, but your options will be very limited if your score is below 600: In this range, it will be more difficult to obtain a loan than if you had good or excellent credit, but it’s still feasible. In general, 630–689 is considered fair credit. Credit scores are important when you’re applying to borrow money from an institution.ĭifferent lenders have different credit score requirements for signature loans. This score is based on the information in your credit files and represents your creditworthiness (i.e., how likely you are to repay a debt). Your credit score is a three-digit number ranging from 300–850, with 850 being the best. There are four primary considerations to qualify for a signature loan: However, good credit is not the only thing lenders assess in a loan application. Since signature loans are not secured with collateral, a key factor in the qualification process is your credit score. Alternatively, they could demand a more stringent repayment schedule.Īt this point you may be wondering, “If a signature loan can be spent on anything and is unsecured, how does it even work?”
However, because there’s no collateral, a financial provider might demand higher interest. In the wake of the 2008 credit crisis, signature loans became a popular choice because they don’t put your home equity at risk. Your car is another example of collateral that may be used in a secured loan. A mortgage is a common type of secured loan that holds your home as collateral.
In contrast, a secured loan holds specific assets that you own as collateral to ensure repayment. This means you don’t need to use any of your assets as collateral for the loan. You save money because the debts are consolidated and the interest on the loan is reduced. After you pay off your credit cards with the loan, you then pay back the loan amount to the bank. A bank might offer you a signature loan at a lower interest rate. Imagine you have several large credit card debts accruing interest at rates of 20 percent or more. Do you need some extra cash to pay for a wedding, a home improvement project, or a large medical bill? These are all scenarios in which you could use a signature loan. Common uses include large purchases, emergency expenses, and debt consolidation. Signature loans are unsecured and are often made based on the lender’s credit rating and/or employment.Ī borrower can spend the money from a signature loan on any item or service they choose. The funds from a mortgage, for example, must be used to purchase a home that has been approved by the lender. This is the opposite of loans like mortgages and auto loans, which must be used for a specific purpose. You can spend the funds from a signature loan in any way you see fit. Personal lending is the fastest growing category of consumer lending and a signature loan is a personal loan, which consists of money borrowed from a financial institution that you pay back in fixed monthly payments. But what category does a signature loan belong to? Personal loans, mortgages, and business loans are some of the most common types of loans. Put the date here.”ĭoes this sound familiar? If so, you’ve likely applied for some kind of loan.
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